There are different types of Introducing Broker of brokerage firms in the financial market, particularly in the forex trading space. Increasingly, we’re seeing a rise in the number of so-called “introducing brokers”, which essentially serve as affiliate markets for fully-fledged brokerage sites in exchange for a fixed commission.
In this respect, they generate their revenues by referring new clients to their affiliate brokers. And, while the fixed commission rates can be relatively low, introducing brokerages, are able to minimize costs and their initial overheads.
Each introducing broker features a relationship with an FCM. The FCM features a direct reference to the futures exchanges to execute trades. FCMs supply trading platforms on which clients have the power to put trades online. FCMs are liable for account management. One of the foremost important features of an FCM is that they deposit all customer funds in customer segregated accounts.
In this post, we’ll consider the dos and don’ts of being an introducing broker, while asking why these are important considerations.
The Dos of Being an Introducing Broker
The first thing that an introducing broker must do is be selective, as it looks to target a growth niche and tailor its content to suit the appropriate audience.
In the current climate, targeting forex trading practitioners is arguably the most lucrative strategy. Particularly as an estimated $6.6 trillion is now traded globally in this market every single day.
As a key part of achieving this objective, you’ll also need to focus on providing high-quality content and targeted information to your potential clients. Whether this takes the form of actionable advice or detailed market insight.
In addition to showcasing how you and your affiliates can meet potential clients’ needs. This also helps to breed trust amongst your audience and optimize your potential conversions over time.
This also brings us neatly onto the idea of establishing long-term relationships with your client base. So, that you can help to introduce them to affiliates within your network.
This helps to drive long-term turnover and profitability while creating a scenario where you can add more fully-fledged brokers to your network over time.
What About the Don’ts of Establishing an Introducing Broker?
One of the biggest mistakes associated with being an introducing broker is being too greedy. Or overly eager to make sales without first understanding the needs of individual clients.
This type of aggressive approach may optimize sales in the short-term. But it will do absolutely nothing to create a business model that can be sustained over time.
On a similar note, we’d avoid making promises or guarantees about your future performance. More specifically, you should avoid providing clients with an idealized or unrealistic impression of the forex market and similar entities. This will enable them to manage their expectations in the same way that they strive to manage their risks.
It’s also imperative that you avoid being misleading or vague with your messaging. Being concise is central to conveying your unique selling points to clients and building trust over time.
The same principle can be applied to your website design, as you should avoid creating a cluttered space that lacks white space. And makes it hard for clients to make informed decisions.