In the world of retail foreign exchange, one of the most unique segments in the market is that of the Introducing Broker (IB). The concept is quite simple: an IB is a firm or individual who provides a value added service to the retail “end” client and for introducing their clients to a specific retail broker, the IB receives either a rebate or markup of the spread as compensation. I believe that every IB should start own Forex Brokerage as they run the critical part of the business- sales and marketing.
What truly stands out about the IB business, is that the services an IB provides are typically ones which retail FX brokers do not offer as part of their standard services such as trading education, managed accounts, trading signals and even technology like social trading platforms and automated strategies. Because of this an entrepreneurial IB has many opportunities and advantages for starting their own profitable brokerage.
Advantages for Introducing Brokers to Start Own Forex Brokerage:
1. By marketing and offering your IB services only through your brokerage, you will create a unique brokerage model that stands apart from your competitors. This will allow you to avoid running the same marketing campaign that most retail brokerages use such as low spreads, deposit bonus, and other common brokerage themes. For example:
Education Providers: This type of provider could offer his courses and a live account all in one package and only through his brokerage. This way your clients receive better customer service by offering a one stop shop for education and live trading.
FX Money Managers / Signal Providers: Instead of offering your managed accounts or signals to every retail broker in the market, make your offering unique by giving your services only through your brokerage. This will increase your trading volume revenues, as well as build a stronger name and brand for your signals. It also allows you to customize your spread markup or commission based on the needs of your trading system / signal.
2. Ability to generate higher revenue on the same amount of business, without charging higher spreads to your clients. Since brokerages typically add a markup to the spread to compensate an IB, the clients of an IB are at a disadvantage due to higher transaction fees. With your own brokerage, you can custom tailor the spreads you offer and keep them in line with industry standards, while still generating more revenue than you would as an IB through rebates.
3. Provide 100% customer support to your clients. Since a majority of an IB’s revenue is generated from a clients trading volume, one of the worst things that can happen is if a client has a poor experience with the broker they choose and they stop trading. With your own brokerage, your firm and staff handle 100% of all client inquiries, customer support and sales. This allows you to build a stronger relationship with your clients and increase their retention and trading volumes, which increases your overall revenue.
If you would like to learn more and take advantage of these opportunities, please contact me for a consultation call.
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