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Why is it important for IBs to make sure that the brokers they refer clients to take customer fund protection seriously? Adinah Brown, content manager at Leverate, explains.
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Forex, Binary Options, CFD and similar trading instruments, all carry an inherent level of risk, however, there is no reason to take on unnecessary risks. As an IB or affiliate, your reputation is often tied to the reputation of the brokerages you recommend. Therefore, partnering up with a brokerage that does not take responsible measures to safeguard its traders’ funds is not only unethical. It is plain bad business.
If you can offer traders the kind of peace of mind that helps them sleep at night because they know they have entrusted their hard-earned money to a reliable brokerage and their money is safe, your traders will talk positively about your brokerage and your business will thrive.
What should you be looking for in a broker before you sign an agreement and begin referring them your precious clients?
Risk management. As standard practice, during potentially volatile events, such as elections and Fed announcements, but especially during times of unexpected market volatility, such as black swan type of events, dealing with a broker that has put in place an advanced risk management processes is crucial to ensuring your traders’ funds will be kept secure.
Segregated accounts. Maintaining segregated accounts is mandated by regulators across the board, so a brokerage that does not maintain separate accounts for their trader’s funds is a major red flag. As a responsible IB or affiliate, you should steer your clients away from such brokerages.
Risk warnings through educational materials. As an IB or affiliate, make sure your brokerage can provide your clients with good educational tools that can double as marketing tools. Ebooks, educational webinars, articles, videos and the like, are great marketing tools that provide traders with value. Educational material helps traders to fully understand the issues involved in trading and establish trading strategies that help them control and manage their own risk. Check out what brandable tools are available from your selected brokerage.
Insured funds. Some brokerages ensure the safety of traders’ funds through fidelity bonds placed with insurance companies. Last year, brokerage firm FXPrimus led the way in the area of funds’ insurance when it decided to establish a €2.5 million insurance backed by Lloyds. Many brokerages have followed suite, not only showing that they are capable of and interested in providing a secure trading environment for their traders, but also providing peace of mind to the IBs and affiliates who have referred them.
If you are an IB or affiliate looking for effective ways to acquire traders, make sure you partner with a brokerage that truly cares about its traders and can back those concerns with business practices that work to safeguard their funds.