One of my favourite business quotes is by Henry Ford who said, “If you always do what you’ve always done, you’ll always get what you’ve always got.” This is a mantra that has always inspired me to push boundaries, identify new opportunities and take risks.
For retail brokers, operating in a competitive industry with very tight margins, standing still is not an option. My top 5 tips for brokers looking to grow in 2021 are:
- Diversify your products – if you offer one asset class, add a second. If you offer two, add a third. It is impossible to predict which asset classes will grow and which will wane so make sure that you give yourself the best chance of success by broadening your offering. Consider which products your clients are most likely to have an appetite for and, importantly, which ones you can make money from.
Think very carefully about which specific products to add. It will be more cost-effective to select products that can easily be added by your existing technology provider. For example, if you only offer FX, consider CFDs or
Tom Higgins CEO of Gold-i
Cryptocurrencies . If you are an FX broker looking to move into stocks, this is likely to involve completely different technology and therefore will require a much bigger investment from the brokerage in terms of setup.
The addition of stocks for FX brokers has rarely been successful – as a non-leveraged product, you can only make a very small amount of money on stocks. It is also worth noting that very different people tend to trade on stocks than FX, and therefore, you will need to invest far more in marketing in order to attract new clients. It is the same for Futures and Options – there doesn’t seem to be a market for these in the retail space, so if you want to offer these you will need to consider a whole new value proposition and look carefully at the competition. You don’t want to enter a market if there are more favourable offerings available from other firms.
- Diversify your client types – If you have added all the products to your portfolio that you think are appropriate, the next area to consider is who else can you sell your products to? By broadening your client type – for example, using MAM products and building a network of Money Managers - you can grow the business by adding entirely new market segments. You can also expand via Introducing Brokers (IBs) ), enabling other parties to use your technology.
- Diversify into new territories – Once the above two areas have been covered off, the next aspect to consider is where else can you sell your products? If your client base is predominantly in Europe, is there an opportunity to expand into Asia? Conversely, if you are in Asia, would your organisation benefit from expanding into the European market?
Until now, opening a brokerage in New Zealand or Australia has been an ideal gateway into growing a client base across Asia. However, with ASIC tightening its regulations, this is no longer the case. If Asia is of interest, look into the individual countries you may wish to target in terms of regulatory requirements and the existing market. It may be better to enter a small, relatively young market where you will have an early mover advantage than enter a larger but already saturated market. Ensure that you undertake in-depth research before committing to any new territory.
Entering a new territory, particularly in a very different time zone and where there is a language barrier, is extremely challenging. You will need to work with local distributors as it will be far too difficult to break into a new market without local knowledge.
- Focus on customer acquisition and retention - Engage with your clients by providing excellent service and high-quality education about how best to trade and how to read the markets. If you have a high-quality offering, you will reduce the level of churn.
Using appropriate communication channels for your clients will also help with retention. Younger traders may prefer to use Tik Tok, Snapchat and Instagram whereas traders in their 30s and 40s may respond better via email or Facebook. Look into using technology that can help you to communicate with clients via their preferred communication method.
- Do something different – Look at ways of standing out in the market. Don’t try anything too gimmicky – some brokers have tried Virtual Reality (VR) for traders but this wasn’t effective in helping them to grow. Consider making interesting partnerships where there is a real value add to clients.
In order to build your brokerage, you will need to invest in the business and will also need to take some risks, which brings me on to another of my favourite quotes – this time, by Elon Musk. “Failure is an option here. If things are not failing, you are not innovating enough."
Without taking a risk, you won’t be able to reap the full potential of your brokerage. Embrace new initiatives and give them time to work. Some will take longer than others to gain traction, and I suggest sticking with any new opportunity for at least six months before evaluating it and deciding whether to invest further in it. And, if one initiative doesn’t work, don’t let this put you off trying something else. Take 2021 by storm, introduce at least one major new initiative and keep evolving.
Tom Higgins is CEO of Gold-i
