Interactive Brokers Acquires Folio Investments’ Retail Segment

Interactive Brokers Group will purchase the retail segment from Folio Investments, according to reports published on December 4. The segment is a part of Folio Financial, which investment bank Goldman Sachs purchased in September 2020.

The purchase is significant and gives a strong indication of Interactive Brokers’ intentions for the near future. The shares of the company have also grown following the news. Here, we take a closer look at the development.

IBKRs’ Acquisition of Folio Investments Explained

The acquisition is a major step forward for Interactive Brokers, and adds approximately 70,000 clients from Folio Investments. It will only obtain the self-directed retail segment, with Goldman holding onto the clearing and custody services. The deal will be finalized in January 2021.

Folio has said that it has turned its focus to supporting investment advisors with technology, custodial, brokerage, and other services. Interactive Brokers will be solely responsible for servicing self-directed investors.

The purchase terms have not been disclosed, but it can be assumed that the acquisition cost less than $500 million. Companies need to disclose the price only if it is greater than $500 million.

Perhaps most significantly, the purchase is expected to add $3 billion in client equity. The 70,000 clients will join the existing 1.037 million clients on Interactive Brokers’ platform. The company has been performing well in 2020, crossing 2.29 million daily average revenue trades in November.

On their end, Folio’s clients will receive the benefit of Interactive Brokers’ solutions. These include the tech features, better pricing, and a wider range of products. The new clients will be able to invest in stocks, options, futures, currencies, bonds, and funds worldwide from one account.

The multinational brokerage firm has a consolidated equity capital of more than $8.5 billion. With a strong technological inclination, it has added several stock exchanges in the past few years to widen its offerings. Two of the most recent additions are the Tel Aviv Stock Exchange (TASE) and Moscow Exchange (MOEX).

Online Brokers Becoming Popular

The COVID-19 pandemic has spurred retail investment, as more investors have entered the market, especially younger ones. Such a purchase will give Interactive Brokers a better foothold in the market. This was already improving in 2020—Interactive Brokers even expanded into Singapore.

Meanwhile, Folio investors will have access to new securities and markets. This will give them a tremendous choice as global markets make a recovery. Online brokers are clearly the next revolution, and Interactive Brokers is attempting to affirm its position as a leading stock brokerage with this acquisition.

What do you think of Interactive Brokers’ purchase of Folio Investments’ retail segment? Will this be a significant improvement for existing clients? Let us know what you think in the comments below.