The FX platform and complete brokerage solution provider, Leverate, has updated their site with more education materials for brokers this week. We thought this is a good time to interview the CEO of Leverate, Ran Strauss, and learn from him about the new brokers joining the industry and what challenges they face.
1. From your experience, where do new brokers come from? (Are they former employees or former trader or just business people looking for new ventures?)
Successful Forex brokers can come from any of a number of paths. Having a background in how the financial services industry functions is certainly a plus, so former employees of brokerage and technology platform companies have an advantage when starting out. Traders who have sustained a profitable portfolio over the long-term can also capitalize on their understanding of the market.
IBs and Affiliates are frequently able to pivot their contacts into a customer base for a new Forex brokerage. These individuals have already spent time learning how traders think, which simplifies planning marketing campaigns. It would also be a smoother transition for people coming from a related industry, such as investment banking and stock trading, which call for a deep understanding of economic conditions.
2. You now offer both Binary Options and Forex, what type of brokerage would you recommend to someone new to the business to start and why? What are the characteristics to choose from?
Both Binary Options and Forex brokerages offer new brokers a lot of potential. I recommend that new brokers think about their prospective client base, and decide on the primary motivator for that type of trader.
Forex brokerages often appeal to clients who are more analytical, and will enter in to trades with a longer horizon. Binary Options brokerages are designed to operate with a much shorter trade window, and may appeal to clients with less tolerance for complexity.
3. In all industries, most businesses fail soon after they start and only a few succeed and prosper. What mistakes did you find new brokers make that lead to their failure?
New brokers are always eager to get started, so sometimes they begin spending money without creating a sustainable business plan. Most brokerages operate on a tight budget during that initial rollout period. It’s critical to measure the ROI for each expenditure, and to maintain enough capital for effective marketing campaigns.
4. What can a prospective broker do to make sure he will not be part of the failure statistics?
The most important work for a new brokerage is finding and keeping traders. Running a profitable Forex business requires brokers to allocate sufficient resources to their sales and marketing teams. Take the time to hire proven professionals who can hit the ground running.
5. What is the process of taking prospective brokers that turn to you? How much capital investment do they need to make sure they can run a successful business long-term?
Leverate spends a lot of time explaining different solutions and working with clients to figure out their goals. Brokers who walk through the process with industry experts can avoid making major mistakes from which they might not recover.
The amount of capital that brokers should set aside depends a lot upon the business plan they have created. Brokers targeting more experienced traders may have a longer period before there is a significant influx of clients. Additionally, if a broker will be cultivating the business from the ground floor, including establishing an entirely new client base, there should be sufficient funds for operating expenses during the initial growth phase.
The amount of capital that brokers should set aside depends a lot upon the business plan they have created. Brokers targeting more experienced traders may have a longer period before there is a significant influx of clients. Additionally, if a broker will be cultivating the business from the ground floor, including establishing an entirely new client base, there should be sufficient funds for operating expenses during the initial growth phase.
