Brokers vs IB: how to be the best partner

07/24/2019 17:17

Not long ago, we did a small investigation.

The results of the survey changed my perception of brokerage and IB relationships.

I used to think that brokers and IB are "best CPs".

They are together to provide customers with the best trading and service experience.

Unexpectedly, mutual distrust can turn them into "enemy of interests."

Andy is the COO of an overseas licensed brokerage firm. He is responsible for the development and branding of the Asia Pacific market.

He was very upset recently.

"The supervision is getting stricter, the market is shrinking, and the competition is getting more intense. When I first came into the Asian market, I was full of confidence. I wanted to enter the market quickly through the local IBs. But the quality of the IB was too bad. I have encountered great difficulties. Even worse, I have also encountered some "bad IBs" who bring huge risks to the platform."

Andy said, "I am eager for quality IB resources. But it's too hard to find them."

Brokers are afraid of encountering "bad IBs", and IB is also afraid of encountering "bad platforms."

Li is the boss of an IB firm who has been doing business for many years.

Li said, "My biggest concern is the security of funds. My customers are all my old friends. They trust me very much. Now in this market, I am most afraid of encountering "bad platform" and the security of funds can not be guaranteed. I let my customers use several platforms to spread risk, but I still worry about the security of the funds. "

Li sometimes considers whether he should have his platform to ensure the security of funds or not. But the high cost and lack of experience of being a broker let him be discouraged.

Is the broker and IB the opposite of the interests?

Let's go back to the beginning of the IB.

IB, Introducing Broker, originated in the futures market and was later widely used in the foreign exchange market.

The main goal of IB is to provide services to localized customers and let the brokerage platform do the execution of the transaction and back-office operations.

Then IB can get a commission from brokers. In general, the more customers trade, the more commissions IB can earn. In the United States, IB is regulated by the NFA.

An IB can be a person, a group of people, or a company.

In theory, anyone can be an IB, but some individuals or businesses are more capable than others to be successful IBs, such as:
 High traffic website
 Stock/futures brokerage company
 Forex trader who made profit
 Asset management company
 Training institution
 A company builds trust with wealthy investors

Since IB's income is mainly from the broker's profits, why do the brokers not directly develop customers, but choose IB to provide services to customers?

Develop direct customers by broker themselves is a good way to obtain customers, but IB is also an important source of customer acquisition.

1.IB helps to improve customer acquisition efficiency and reduce the workload of brokers. Brokers focus on the mid- and back-office operations of the transaction, while IB focuses on providing specialized services to customers.

2. Open offices around the country to serve customers is too costly for brokers and does not have economic benefits. But this is what IB good at. Because they operate small offices across the country.

The reason why IB cooperates with brokers is mostly because of insufficient finance. Most IBs do not have the money to directly provide transactions to customers, which involves regulatory licenses, LPs, necessary technical facilities and the huge cost of maintaining trading platforms.

Brokers and IBs should be the "best CP", not the "enemy of interest."

So, how can brokers and IB become the "best CP"?

The biggest contradiction between brokers and IB is “lack of trust”. So it is especially important to regain trust.

For brokers, be open and transparent, ensure the security of funds, provide customers with good trading experience, these all help brokers to win the trust of quality IB.

Here are some important characteristics that brokers should have:
 Safeguard funds
 Provide a good trading experience
 Quality customer support/service
 Provide the necessary support for IB

For IB to achieve long-term success, they must keep the focus on customers.

To ensure the long-term interests, IBs should provide customers with quality services, appropriate education, and appropriate advice for different investors, so that the customer's life cycle can be extended.

To win the trust of customers and achieve mutual benefit, Brokers and IBs should trust each other and do their things.

Are you a broker or IB?

If you have a story that you would like to share with us, please feel free to contact us:


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