The following article is courtesy of Konstantin Rabin of ForexBonusLab.com
Even though many people feel that retail FX sector is over saturated, we still see new brokers popping out every day. The reason for this is simple. FX still remains an over profitable industry. Nevertheless, the competition is severe and today it is as hard as never before to actually start your brokerage up.
Needless to say, starting with your own brokerage is much more lucrative than going for a white-labelled solution. Yet there are many costs involved and today we will take a look at the three items that save your money when opening a company in the retail FX sector.
Locating your headquarters
The personnel will majorly contribute towards the success of your brokerage. However, it is important to consider that brains also come at a high price. Not only you need to account for the wages, but it is also vital to consider all of the possible overheads associated with the personnel.
It is obvious that the majority of the brokers are headquartered in either Cyprus or England. Even though the chances of finding proper staff at these locations are higher, you may expect to spend quite a lot to hire even mediocre specialists. Next to this, the overheads at such locations are actually going to be sky high.
Hence, the tip here is to actually look for moderately priced locations that are still able to satisfy your staffing needs while you can keep just a small office with a couple of employees for the regulative purposes. It might be a good idea to locate your headquarters at one of the Balkan states as the level of expertise in these countries keeps on growing while the costs still stay on a communistic level.
Alternatively, it is actually possible to operate with no or off-shore regulation, by incorporating your company in Belize, Seychelles, Marshal Islands, British Virgin Islands or similar territories. Even though your company might be less trusted, it is certainly a cost effective solution. Apart from that, if you plan to market the markets outside of EU and Australia, having a regulatory body backing your company up may not be the best investment. If you decide to go for an off-shore incorporation, you will also need a foreign bank account in place.
There are actually quite a few things to consider when establishing your operations, hence sometimes it is might be a better choice to actually let the professionals handle the whole setup for you. There are a few companies available, but I personally found NewBroker company to offer an outstanding value for money. The guys from NewBroker specialize in establishing both Forex and binary brokers.
Choosing your software
Most of the brokers offer one and only MetaTrader 4. Hence, if you are thinking of opening a brokerage, most probably you are accounting for the costs of MT4 platform too. And these costs might be quite high. Next to covering licensing costs, your brokerage might need to spend additional funds to build bridges, add useful third-party add-ons and connect various liquidity providers. All of these is needed in order to stay competitive as the amount of MT4 brokers is just enormous.
If you decide to go for another platform, you will not only to save on the platform’s direct and indirect costs, but also you might stand out from the competitors. When going for such a platform as UTIP, you will get mobile trading apps, a standalone Windows terminal and a WebTrader at the costs that are just fractional when compared to MT4. Next to this, this platform also comes with integrated liquidity and payment systems.
Quite a few FX brokers have successfully added binary platforms. The idea behind this is simple. If your broker doesn’t offer binaries, a share of your clients that is interested in binaries will go elsewhere. This is another great thing about UTIP as the platform allows a broker to offer its clients both binary and FX trading.
Going for partnerships
Last but not least, starting up your operations and establishing your core offer is of a significant importance. Nevertheless, you still need to spend both money and efforts to get your brokerage promoted well. As FX trading is done online, a successful online presence is absolutely vital. You may operate online only or have a broker that serves clients via an office and still offers a great website to attract the users. However, a successful presence is not only about your website, but also about any other FX website on the internet that get a fair share of visitors.
As retail FX is an over profitable industry, the advertising costs tend to be quite high as well. This is why focusing on the performance-based advertising should be a goal of every broker.
There are quite a few affiliate websites that might generate a significant number of traders. For example, Forex Bonus Lab is a website ranked #1 at google.co.uk for the keyword Forex Bonus. Shall you decide to run a Search Engine Advertising campaign for this keyword, you might expect to pay around $100 per lead from the UK. Wouldn’t it be more cost-effective for your brokerage to pay anywhere between $300 and $700 for an active trader?
Even though not every site would be open to work with a start-up brokerage without listing fees, having a great partnership program in place will definitely lower such fees.