Have you ever asked yourself: What motivates a trader (client) to open an account with a broker when seeking to trade foreign exchange (FX)?
The answers tend to be multiple. They encompass aspects of trading that an individual trader most often cannot experience or optimize when trading strictly on his own (by himself). For example, with their larger-scale operations and capabilities, many brokers can provide or assure regulation compliance, a diversity of products for trading, and access to funding facilities, leverage, and promotions.
But, in a global FX marketplace filled with cultural differences (and diversity of technology and business models), how can a trader pick a broker that will deliver the best results and the best service? (Remember: attributes that are considered ‘best service’ can vary much based on geography and culture.)
Put another way: what does a broker need to provide to clients in order to inspire traders locally and globally to open accounts with confidence?
This can be explored as follows:
Regulation, location, and culture. Even before considering technology or business models, many clients like to open accounts with brokers that they can trust, starting with an emphasis on safety in a regulated environment. As a client, I want to know without a doubt that my broker is serious and follows the rules. My confidence increases further if my broker is geographically close to me. I want to be able to go and actually knock on the door and expect someone to personally take care of me, explain what I don’t understand, support me, and and guide me in all aspects of opening and managing my account.
I need to see and feel that the broker is real and well established. I want to be able to look him or her in the eye. In some cultures, I may wish to shake his hand. All of these confidence-building comforts also assume that the team at my brokers’ office speaks my language and shares my cultural practices. Put another way: I am definitely not expecting or seeking that my brokerage contact represents a culture different from the one I live in.
In a global FX marketplace, many traders now have accounts overseas, rooted in places they don’t live. There are so many FX brokers that sometimes traders are not able to open an account where they are located and with the conditions they are looking for. Trade-related tasks and relationships can sometimes be difficult—even straightforward transactions like sending funds or making a claim. This is a reality, and we need to face it head-on.
So, boiled down to basics, what are the minimum features that I recommend when you select a broker?
(1) it is regulated;
(2) it has the trading platform I am looking for;
(3) it has the business model I like;
(4) it offers a physical presence nearby me; and
(5) its team shares and operates within the same culture as me.
Even if individual traders’ preferences about these factors vary widely, these five categories of compatibility comprise the essential criteria that enable maximum confidence in the trader-broker dynamic.
Evolving to meet these considerations, today’s brokers are expanding in both geographic presence and customization. They are opening more offices worldwide (to cover time zones close to expanding local bases.) At the same time, they are providing new technology, new platforms, and new products.
Let’s turn to technology for a moment. A broker’s technology is a key ingredient in any trusted and successful solution for their clients (traders). For best results and service, a good broker’s technology must be top of the line at all times. Remember: we live in a very fast changing world. Prioritize technology.
The best brokers today will provide clients a wide range of products and platforms—maximizing client options, aiming to make it nearly impossible for a prospective client to refuse to open an account with them. The best brokers provide much added value that clients see and appreciate. For example: Imagine you want to open an account with a broker because your money manager is using a MT4 EA, and at the same time you want to trade for yourself using an ECN account.
To do so effectively, you need a broker who can provide both aspects of your approach or you will have to deal with two different brokers (which is not the most efficient way). Imagine: going to a restaurant with your clients, wanting to have wide options on the menu, so all of you can have the dinner of your preference—rather than going to a place that serves only one type of food, while your clients have a wider range of food preferences.
The FX Global Code – Is Self-Regulation the Future of the Industry?Go to article >>
So variety, diversity, choice, options are all valued by any trader. But how easy is it for any random broker to provide a vast array of products and platforms? The answer is – not easy.
First, the commitment to such variety can be very expensive. Second, and related, implementing such variety can require very big “know-how” and IT development. If a successful broker has funds available, it is often a much wiser choice for the broker to use such funds to grow the business and efforts related to obtaining more results (investing in activities like marketing campaigns, expos, and creating new offices) rather than trying to build a platform. And – second, why re-invent the wheel? Why not use what is already available in the market?
Shifting to the Broker’s Perspective
So far we’ve pondered what clients should actively seek in a broker to feel confident opening an account. For further clarity, let’s now pivot that question: What can a broker do to offer its clients more options?
One of the solutions available is called a white-label solution.
A broker can “white label” a new technology and platforms (desktop, mobile, and web versions, even for Mac, linux, or any operating system). Built upon the work of often-larger industry players, a white-label solution comes fully customizable and tailor-made for the broker (and ultimately his clients) in all aspects, including reporting, integration, back office, trading book options, and special features that unique brokers need. Some white-label solutions even come with added features such as 24-hour market support, a training toolkit, bank accounts, marketing tools, custodian services, FX online community, EA’s stores, and the option to provide “sub white labels” to others.
White-label solutions raise an array of related questions: How difficult is to obtain a white label? How expensive is it? How much time is needed to onboard it? And what aspects need to be considered in the context of cultural differences across the Far & Middle East, Europe, and America? What steps can a broker who is embracing white label take to ensure that the chosen solution-set will suit the broker and his diverse clients?
Here are some answers to these questions:
There are many available options for white labeling a product/platform, not an excessive number, but enough. Examples are: Jforex, MT4, cTrader, UniTrader, Integral, Currenex, ACTForex, Saxo Trader, to name a few.
Whichever solution is chosen, the broker must be sure that the product will provide added value to each client and to the broker, and that the level of customization is detailed, while the system itself is user-friendly and compatible with the broker’s existing infrastructure. The front end must be flexible in order to adapt to different cultures and mentalities. For example, if my clients are accustomed to seeing the reports in a certain format, the new platform must create or render reports in a similar way.
Clients from the Middle East expect certain features, functionalities, and report-views, and clients from America are not necessarily expecting the same things (For example: Spanish clients may place the strongest value on ‘features and functionalities’ of the platform, while Japanese clients focus more on low spreads, and Chinese clients prioritize the credibility of brokers). Ultimately, a client’s decision to choose one broker over another might hinge upon cultural customization of services.
Human beings are different by default and like different things, and today thanks to globalization, any client can find what he wants in almost any part of the world. (One exception are clients from certain nations that must follow their country’s stricter rules ). The brokers who do the extra work to figure out what “cultural customization” means to their particular client segments will have the greatest success.
So, the most successful white label provider(s) will consider many factors – from technology to culture.
A white label arrangement is a partnership with very long-term potential, much like a marriage. In both cases, individuals need enough time to ‘date’ and assess in order to know that eventually they would like to form a long-term bond. Strong white label providers must and will spend enough time getting to understand brokers’ needs, so that the provider can incorporate key shared ideas, tailor the product design, and deliver a unique partnership to its brokerage partner(s).
Despite the non-descript phrase “white label,” any such tailoring process is never just a “copy and paste” of other white label services already rendered for other/prior partners. The development of a tailored white-label solution might take from 8 weeks to several months, even 8-10 months sometimes. Also it is important to consider the level of legislation in certain jurisdictions that might extend the implementation time. (For example, accommodating a partner’s need to create special reports for authorities).
When in doubt, don’t be in a rush: it’s better to take more time and deliver an excellent product for the long-term relationship. It’s not about quantity—it’s about quality.
Equally, the broker also must assure itself a proper and profitable business. The tools that accompany the white label solution must be the proper ones. Risk monitoring/exposure and system integration must be adequately addressed. The broker must be provided adequate tools of cultural expression based on the office geography. Keep in mind too that some brokers have multiple offices, meaning that components of their white-label solution will need to be adapted within the same brokerage for its different global office location. For example: A white-label partner’s office in a city in the United States will require a different set up than his office in Tokyo and in Dubai.
Regulations are not the same, and trading options are different across the offices of the same broker. Also the possibility for the broker to control and manage the risk MUST be an option, and this option must be delivered in the most friendly way, recognizing and meeting the broker’s needs. In my past article, I shared thoughts on the importance of brokers handling risk—so I again emphasize here that risk-handling options comprise a KEY feature. (Another important aspect to consider is the way the liquidity is integrated.)
In concluding this article, I’d like to highlight once again the importance of seeking, courting, and finding a good partner, one that offers cultural and technological core competencies, when selecting a white label solution; look calmly, do not rush, evaluate well, make sure the product allows all possible solutions and options—and that the solution can be easily adapted in the future, across time and geography (not a closed product). Cultural and mental factors are important to consider carefully. The onboard of the entire white label process must be smooth and easy. You will feel thankful when it is.
“So, now it’s your turn to help bridge continents. Please tell me and our other readers: Have you ever been surprised (in a good or bad way) by an exceptionally good or bad “cultural fit” in a business situation that you’ve conducted across geographies? Please share your stories or any lesson you may have learned. We want to benefit from our shared wisdom.”