Last week IG announced that it would give clients 8.5% on cash holdings if they opened an account to invest in (real) stocks. That includes a regular investment account or a tax-efficient one.
As readers are aware, 8.5% is now double the base rate. So you are – in theory – getting about double what you would by holding cash in the bank.
There are some terms attached to the deal. You have to actually place a trade to get the interest and the 8.5% rate only runs until the end of August. IG also only pays interest on cash holdings up to £100,000.
The promotion was launched on May 8th, meaning the most you could earn on this would be £2,701.37, assuming you deposited the maximum amount of £100,000.
IG is not the only company to have launched an offering with an interest rate higher than the central bank’s. We’ve looked before at how Trading 212 used this strategy. XTB also did something similar this year by offering 6.5% on uninvested cash for UK clients.
To understand why, think of the whole process as being like a cost per acquisition (CPA) agreement mixed with a PR campaign.
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IG announced the launch the day after the Bank of England confirmed it would cut rates to 4.25%. So the first step is to piggyback on that and use the press around it to generate some free press / hype for the company.
This worked for IG (kind of) as they got some pick up in the UK press as a result of the announcement. You can also see an immediate discussion of it here on a finance subreddit for the UK.
The other thing you have to factor in is that lots of review sites regularly update how much interest you can earn on cash holdings. Although this is a temporary promotion, it can still put you at the top of the rankings, which means more click throughs and sign ups.
As there is no way to ‘game’ these lists (you cannot pay to be no.1 if you are paying a lower rate than someone else), it’s potentially a free way of getting into that top spot.
Finally, affiliates may choose to publish promotional articles about the deal. Again, these are often done on a CPA basis, so no fee is involved.
The result is that you get some good free press and more potential for leads. Even if you don’t get any clients from it, there is some nice brand awareness that IG actually has an investment product.
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However, like I said, this also has a CPA-type element to it too. The reason for that being that your marketing spend is effectively the excess interest you are paying on cash deposits to clients. You obviously only spend if the client signs up.
In this case, the maximum client acquisition cost can be about £1,350. However, that is only if someone deposits the maximum amount possible. The reality is most accounts will be much smaller than that, assuming the campaign actually has an impact.
The average account size at IG for stock trading was just shy of £45,000 at the end of its 2024 financial year. Assuming the average new account size is in line with that then you would get a customer acquisition cost of around £600. The reality is the account sizes, again assuming it works, will still probably be much smaller than that on average, meaning a lower acquisition cost as a whole.
For IG, the more interesting question is what the point in doing this is. If you are on mobile, the promotion on the company’s website links you to the IG Invest app that has no CFD product. There is thus no cross sell opportunity.
To top that off, they just bought Freetrade, meaning there is already a group entity investment app. It’s like competing with yourself but for no – to me – real obvious gain.
If you look at how other people have structured this offering, it tends to just be part of the Robinhood / Trading212-style marketing technique.
You market cash equities aggressively, get as many clients through the door as possible, and at a certain point some of them convert to trade CFDs (or options if you’re in the US). IG’s promotion can do that on desktop but not mobile. Maybe it’s just for the free press?
