If you are interested in starting a forex business, you have probably heard a great many terms used, but are somewhat unsure about the differences between each business model, the pros and cons of each route, and what is the best way for you to build your business going forward. There are many important similarities between introducing brokers and white labels, but also some important differences. This post will outline how each business model works, along with the pros and cons you should consider before starting either business.
At the most basic level, the white label and introducing brokerage business are very similar. In both business models, your goal is the same, you need to attract and retain traders to trade on your platform. For both introducing brokers and white labels, the more traders and trading you have going through your platform, the greater the revenue and profits your business will make. In both cases, the most important part of your business model is how you plan on attracting traders and keeping them trading on your trading platform. Here are some common ways to attract traders and clients to your forex business
- Seminars – In person seminars are probably one of the most effective ways to attract clients to your brokerage. By meeting your clients in person, you and your team can build trust and answer questions directly.
- Training – Training is an effective method for obtaining clients for your brokerage. By offering training and education, you given away educational services with the premise that the clients will then trade on your platform. This helps your brokerage stand out from the crowd, although it tends to attract newer traders (thus with smaller balances)
- Online Advertising – Online advertising through Facebook and Google allows you to effectively reach out to potential clients and traders across the globe. The downside of online marketing is that it is a relatively crowded venue and hard to stand out from the crowd of other brokers advertising online.
- Offline advertising – Offline advertising such as radio and television is an effective tool that is not as commonly used as the methods above. The advantage to this method is that you have a lot less competition then online advertising.
Once you have decided your advertising model, you need to decide on whether you want to be a White Label or Introducing Broker. There is some difference depending on your white label or brokerage partner, but this review will cover the basics.
Introducing Brokerage – Introducing brokerages act as marketing agent which recruit clients to a brokerage partner. When the clients decide to open an account and make their deposit, the Introducing Broker assists the client in opening an account directly with the brokerage, who then takes the deposit directly. The Introducing Brokers relationship with their brokerage partner is explicitly stated. The advantages to the Introducing Brokerage model are that your costs are much lower (you don’t’ have to buy the technology) there is much less work related to setting up and handling payment systems (this is all handled directly by your brokerage partner) and you can piggyback off the of the brokers brand and support system. The disadvantages of this model is that it is harder for the introducing brokerage to build their own brand (as the brokerage has a stronger brand by default.)
White Label – When you establish a White Label, you must purchase a MT4 White Label license from a full license MT4 Server license holder. You also need to establish your own payment gateways and processes for taking deposits. While you have full control over your brand and business, this implies more effort, time, and money during the setup phase of your brokerage. As a new brokerage it will take time to build your brand and credibility, which gives you great opportunities but also requires a great deal of work. On the plus side, you have much greater control over how your trades are processed, which allows you to make more money off your business.
This is a simple synopsis of the differences between having an introducing brokerage or having a white label. For much information, reach out to us today, either using our contact form and or send an e-mail to email@example.com.