IBKR – HOW TO OPEN AN ACCOUNT:
STEP-BY-STEP GUIDE
Tips on what to pay attention to
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Tips on what to pay attention to
So you have read our comprehensive review of Interactive Brokers (affectionately abbreviated IBKR or even IB by its users) and you have decided to open an account. This guide will walk you through the steps of the process.
In some ways, this broker account opening process can be longer than for other brokers. That’s because IBKR is more sophisticated. But, we make this process a bit simpler. In the end going through it is worth the hassle given the benefits the broker may give you in the long run.
Let’s get started!
We added special considerations (Marked as⚠️) to pay attention to. They may be different to other brokers and/or have special importance.
STEPS TO OPEN AN ACCOUNT
- Phase 1 – Quite standard process: Press the open button, create and account and verify your email. Even though you may be based in France and land on interactivebrokers.co.uk or another IBKR site it doesn’t matter much. It’s what you fill in the country of residence (and not citizenship) during the username creation step that will determine which IBKR entity you’re assigned to. We explain how it works.
- Phase 2 – A few standard stesps: account type, provide personal information, including employment, net worth, choose base currency and security questions. Consider that a joint account is available but may have legal/tax implications depending on your residency. We explain why.
- Phase 3 – Configure your account, including trading permissions, answer regulatory question and opt in or out of the Yield Enhancement Program. Pay attention to the difference between Cash & Margin accounts as well as the settings required to trade UCITS ETFs. Make an informed choice in relation to the Yield Enhancement Program. The decision is yours, but we give some guidance.
- Phase 4 – Confirm your tax residency, sign the agreement and provide proof of identity & address. Consider your residency and the treaty in place between your country and the US to ensure that you won’t pay extra dividend taxes.
- Optional Settings & Account Security – Choose how to fund your account and add Two Factor Authentication.
Here is the full analysis
Select Your Country To Be Redirected To The Right IBKR Site
👉 OPEN AN ACCOUNT NOW!
Phase 1: LOGIN & Email Verification
Step 1️⃣ Country Redirection and Open An Account Button
- ⚠️Server Redirection. While depending on your location you may be redirected to the nearest IBKR server (.ie, .co.uk, .com.au etc), this will have no bearing on the IBKR entity with which your account will be held as this will be determined entirely by your country of residence. However, to make it easier our links above and below this guide will direct you to an appropriate IBKR entity. Using this guide’s drop down select “Any Country in Europe” if you live in Europe (e.g. France, Italy or Poland), “UK” if you invest from the United Kingdom or “Any Other Country” e.g. if you investing from outside Europe e.g. Asia or North America.
- Click the red “Open Account” button on the top right of the screen, as indicated in the below image.
- Click “What you need” to review the information and documents which will be required. The documents will always include a copy of your ID and a proof of address. If you have one, a bank statement showing your address is the best option as proof of address.
- If needed, read also the “guide to choosing the right account”. Note that not all options are available in every country. Later in this guide, we provide some information to help you decide whether a joint account with your partner or spouse is a good option.
- Once ready, click “Start Application”.
Step 2️⃣ – ⚠️Create Username, Password & Entity Allocation
- Enter your email address and choose a username and password:
⚠️Attention: the “Country” field is your country of main residence, not your country of citizenship
Step 3️⃣ – Email Verification
Check your email and confirm:
Phase 2: Personal information
Step 4️⃣ – Select The Desired Account
Individual or joint account?
A concern of many brokerage account holders is to provide swift transfer of their assets to a surviving loved one upon their passing. This is particularly critical in case of an unexpected and sudden death. One potential way of achieving this is through a joint account with rights of survivorship. However, there are caveats and uncertainties.
⚠️ The way IBKR states this works is as follows: “Joint Tenants with Rights of Survivorship – A form of ownership in which two or more parties have equal interests in the account and in which title to the entire account goes to the survivor(s) upon the death of one of the account holders. This process avoids court probate of the property, but may have some tax consequences which should be reviewed with a tax advisor prior to opening the account.”
At a glance this sounds good but (❗the below is not tax/legal advice – in case you take a joint acccount verify with a legal/tax advisor)
- Assets Ownerships. Everything in the account automatically belongs at 50% to each account holder, no matter how much each tenant contributes to the account. This could be a problem in case of dispute between the tenants.
- Each tenant has full access rights to the entirety of the account. Operations on the account, including withdrawals, never require the agreement of both account holders.
- Account May Be Frozen. Depending on the law of your country of residence, joint accounts may be frozen just like the rest of the assets of the deceased until the succession is processed by the authorities.
- It Maybe Illegal. In many countries, it is illegal to use a joint account to bypass legal heirship and the inheritance laws of your country.
- Tax Consequences. There are potential tax consequences: for example, if you are the sole contributor to the account and your joint tenant passes before you, you could be liable for inheritance tax on 50% of your own assets
In view of this, before signing up for a joint account, thoroughly review the inheritance and tax laws of your country and the treatment of joint accounts by said laws. It may be simpler in the end to stick to individual accounts, have a will in place and leave instructions to your heir(s), lawyer or notary to contact the IBKR estate processing department upon your demise. It may take some time before the succession is resolved but you can also ensure that your loved ones have access to sufficient funds in the meantime, for example by funding an account in their name while you are alive or by having a term life insurance in place.
Select an Individual Account
For the purpose of this guide, we will use an individual account. Click start application.
Step5️⃣Provide Personal Information
Continue filling the form.
If your country of residence issues taxpayer identification numbers, provide yours. In some countries, this number is the same as your national ID number.
If you are also a tax resident in countries other than your country of main residence, provide this information.
Step 6️⃣ Employment And Source Of Income Information
Enter your employer’s details if you choose “employed”:
Indicate your source(s) of wealth.
Attention. Always be in a position to provide documents to justify your source of wealth (payslips, employment letter, inheritance documents, trading gain statements from former brokers etc). Be sure to keep these in your records, should you be required to provide them one day.
Step 7️⃣ Currency, Security Questions Setting & Phone Number
More about base currency
- Base Currency. The base currency of your account is that in which the aggregate accounting and reporting of your account will be performed. Also, fees and commissions will be charged from your base currency cash balance.
- Available Currencies. The available base currencies are AUD, CAD, CHF, CZK, DKK, EUR, GBP, HKD, HUF, JPY, MXN, NOK, NZD, SEK, SGD and USD.
- Multi-Currency Feature. Typically, the base currency will be the principal currency in which the client intends to hold cash and the denomination of instruments which the client trades. However, clients can maintain cash balances in multiple non-base currencies, deposit and withdraw non-base currency cash, trade instruments denominated in non-base currency and convert cash balances from one currency to another.
- Base Currency Change. The base currency of your account can be changed at any time once your account is open via the account settings.
- Special Cases. Accounts held with IBKR India can only choose INR as their base currency and accounts held with IBKR Japan can only choose JPY as their base currency.
- Funding Your Account. Once you have funded your account, always keep a non-zero balance in your base currency. A zero or very low balance often creates unnecessary trouble such as pesky warning messages or forced liquidation of holdings to cover an unforeseen upcoming fee or interest payment. A good practice is to maintain around $ 100 worth of base currency balance.
Confirm your mobile phone number:
Phase 3: Account Configuration
Step 8️⃣ Configure Your Account & Set Trading Permissions
Configure your account:
- Beginners. Beginners are advised to use a cash account to prevent potentially expensive mistakes with margin accounts. The account type can be changed later via the account settings. Click the question marks for more information.
- Investment Objectives. Enter your income and net worth details and investment objectives.
- ETFs setting. To trade ETFs, select at least the first two investment objectives.
Cash or margin account?
- ⚠️Cash vs Margin Accounts. In a nutshell, with a cash account you can only invest as much as your cash balances. With a margin account, you can borrow extra money from the broker for your trades, pledging your positions as collateral. Of course, you also pay the broker margin interest on this borrowed money.
- ⚠️When You Need A Margin Account. A margin account is necessary for some types of trades, such as short-selling or trading some types of derivatives. It is not recommended for most investors.
- ⚠️Margin Account Requirement. Margin account holders have to maintain specific margin requirements. The amount they can borrow depends on the value of the positions pledged as collateral. If the value of these positions drops, causing margin requirements to be triggered, the broker will force-liquidate some positions to diminish the borrowed amount so that margin requirements are within bounds again.
- ⚠️Portfolio Vs Basic Margin Account. A portfolio margin account differs from a basic margin account in the way the margin requirements are calculated. With a basic margin account, margin requirements are calculated on a position-by-position basis, whereas with a portfolio margin account, a risk-based model is used calculate less stringent margin requirements. Portfolio margin accounts may be considered riskier than basic margin accounts.
- ⚠️Cash Account Limitation. Cash accounts have some minor inconveniences, such as having to wait one or two business days for trades to settle before using the proceeds, but for most investors better be safe than sorry. It is also necessary to wait for cash deposits and currency conversions to settle before using the proceeds for trading, although as of recently, IBKR will automatically perform a currency conversion necessary for a trade in a cash account and this feature does not require to delay the trade.
Trading experience and permissions
- ETFs permissions. If you will only trade ETFs, no additional products beyond stocks are needed since ETFs are considered as stocks for trading purposes. You may want to enable additional products such as mutual funds, and/or bonds if you intend to directly purchase bonds rather than bond ETFs.
- Suggested Choices. Select appropriate experience, number of trades per year and knowledge level.
- ⚠️UCITS ETFs. If you will trade European UCITS ETFs, as many US non-resident aliens should for tax reasons, click “add” under the stock permissions and add European countries to the list of countries you can trade in. You do not need to add all the European countries. Many ETFs are traded in USD and/or GBP in the UK and Switzerland, and in EUR in Germany, the Netherlands, France, Italy and Belgium. Selecting these countries is sufficient to trade UCITS ETFs.
- Updates. Permissions and trading countries can be changed later through the account settings. We have a separate guide on this.
Step 9️⃣ Regulatory Questions
Step 🔟 Stock Yield Enhancement Program
More about the stocky yield enhancement program
- What is it. This basically means you accept that the shares you hold be loaned by IBKR to short sellers.
- Advantages. Short sellers are paying interest to IBKR for this facility. IBKR will give your 50% of the interest and keep the other 50% as their profit.
- ⚠️Risks. IBKR guarantees this loan, meaning that if the short-seller is unable to return the borrowed shares, IBKR is liable and will purchase the shares with its own money to return them to you. So eventually, the risk of losing money is if both the short-seller and IBKR default on their obligation.
- No Minimum Commitment. All of the above is done on an aggregate basis with all the other IBKR clients holding that position and participating to the program. Therefore you can still sell your shares at any time and you still receive the dividend paid by the shares if any.
Phase 4: Finalising your application
Step 1️⃣1️⃣Tax Residency
Fill in the W8-BEN form. The purpose of this form is:
- Non-US Resident Confirmation. to certify to the US Internal Revenue Service that you are a “US Non-Resident Alien”, aka NRA, meaning you are neither a US citizen, nor a US resident.
- ⚠️Tax Treaty Benefits. to claim the benefit of an income tax treaty if one is in place between your country of main residence and the USA. In absence of an income tax treaty between your country of residence and the USA, you would pay 30% US tax on the dividends of US companies and on the distributions of US-domiciled ETFs. With a tax treaty in place, this rate is lowered to the rate mentioned in the tax treaty (as low as 15%).
- US SSN. If you do not have a US SSN or ITIN, leave this field blank. The list of countries which have an income tax treaty with the USA is in the dropdown menu.
- Country with No Treaty. If your country of main residence is not listed, tick “I do not qualify for US tax treaty benefits”.
Step 1️⃣2️⃣Final Steps And Signature
State that you agree and consent:
Sign and Continue:
Review your information and edit if necessary:
Review the agreements and disclosures and sign:
At this point, you may receive a message that “more information is required to create your account”. Click continue.
Step 1️⃣3️⃣Finalise Your Application
You will be presented with the below or a variation of it. You do not really need to fund your account for faster processing. If not done already, it is strongly suggested to verify your mobile phone number, which will be necessary to set up two factor authentication later.
It is mandatory to verify your identity and address by taking pictures of your documents and taking selfies of you holding them with a smart phone. Click “Verify Identity”.
Step 1️⃣4️⃣Verify Your Identity & Address
Enter the details of the ID you will provide and click continue.
Choose an option. Depending on the part of the world you reside in, the streamlined method may or may not work. The streamlined method also uses the location service / GPS of your mobile phone to verify your address.
If you chose the manual document upload, you will be requested to upload one document to verify your identity, and one document to verify your address. Click the question marks for a list of acceptable documents and details.
Select a document as proof of identity and upload it or take a picture of it with your mobile phone. Accepted documents are:
- Passport;
- National Identity Card;
- Driver License.
Select a document for address verification and upload it or take a picture of it with your mobile phone. A bank statement showing your address is a very good option. Other documents can be:
- Utility bill (electricity, gas, water, landline telephone, home broadband, or TV; mobile phone bills are not acceptable forms of proof of address);
- Council tax bill;
- Home insurance bill;
- Mortgage or brokerage statement;
- Signed and stamped letter from your bank on the bank’s letterhead confirming address;
- Credit card statement (not older than six weeks);
- Government issued letters or statements (property tax bill, confirmation of residential address from the local authorities or a pension statement; must be on official government letterheaded paper);
- Resident permit;
- Driver’s license or national identity card (cannot be used as proof of identity and also as proof of address).
Optional settings & account Security
Step 1️⃣5️⃣Optional Settings
Once done, back to the main screen and the additional options. You do not need additional accounts or advanced market data at this point. It is however strongly suggested you set up two factor authentication.
Step 1️⃣6️⃣Two Factor Authentication
You would be able to set up two factor authentication using just SMS messages to your confirmed mobile number, but it is strongly suggested that you install the IBKR mobile app on your smart phone and use the IB digital key which comes integrated with the app instead of SMS messages. In this case your two factor authentication will be performed through app push notifications. This is more convenient, reliable and secure than second factor authentication via SMS. Choose an option (iOS or Android) and follow the instructions.
Once done, you simply have to wait for IBKR to review your application. This may take a few days. Comply with any requests for further information by IBKR’s team.
