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Oct 01, 2021

Differences between an introducing broker (IB) and white label

The global financial market is one of the world’s largest market filled with a lot of potential for profit growth. The financial market accounts for an average of $6.6 million in value of trading on a daily basis across the globe. This presents an attractive opportunity to get a slice of the pie. Besides entering the market as an individual trader whereby you need to invest your own capital and higher risk, there are two alternative popular ways to make an entrance in the exciting trading market business. One is by considering to be an introducing broker ( IB) or secondly starting your own brokerage through a white label option which can yield significant profit. As the name itself implies an IB is an independent agent that links clients seeking to access the financial market to brokers, but they do not execute any trade for the clients.

Both above-mentioned options offer a great way to start or grow a business and have a common goal in the sense that the primary target is to get maximum traders that will trade on the broker’s platform. However, whilst they share common goals to attract and retain maximum trading volume on the relevant platforms, they remain different in their scope of functions and level of autonomy. At the simplest level IB’s are basically marketing agencies promoting the brokers platform, they become the intermediary between the broker and the trading clients. They essentially facilitate clients with opening their account with the broker firm they are hired by. The IBs generate their profit from a commission that they take from the clients future trading volume. IBs do not hold funds of client as the client’s investment funds is credited directly into the brokers account. The IBs attract clients in various ways from issuing a unique ID assigned to them by the broker to keep track of new users or other forms like email marketing, sending shout outs, displaying banners on IB’s website and forums. However, it is noteworthy to highlight that IBs are usually rewarded only when the clients engage with the broker by signing up and investing. Working as an IB is a good start if you want to build your clientele base but promoting another company’s business can only take you so far if you have a greater vision. This is due to the limitation in autonomy granted by being an IB. As an IB you promote another company’s business, but you do not have an identity for yourself or control over the business operations.

 

On the other hand we have white label solutions that fills in on the shortcomings of being an IB. Embracing a white label solution allows you to have autonomy and control of how you wish to brand your company. In comparison to an IB a white label solution operates on a much larger and broader scale. A white label solution is effectively setting up your own broker house with its own risk and client support. A white label functions like a regular broker house however they have limitations on controlling elements such as the opening and closing market time and the currency pair. Additionally, all order execution is channeled through the primary broker.

But despite the afore mentioned white labels still have full control over their revenue, they set their own spread and commissions unlike IB’s referral commission basis. White labels accumulate their profit from the total clients trade volume which is higher than an IB. Hence the benefits that you can reap from a white label option is far greater and rewarding. Additional advantage includes not having to purchase a server license, neither stress over the hosting and backup system or to configure any settings . Furthermore all administrative reporting are handled by the primary broker . In turn this allows you to save money and time to invest in other key priority areas in the business such as sales and marketing that will allow you to have a strong foothold upon your launching .

 

Having the flexibility to grow your own business is key if you wish to make a name for yourself in the industry a comfort that an IB business model will not grant you as you will be walking in another firms shadow and restricted by their terms. However, it would be unfair to totally dismiss IB as viable startup option. To a great extent it is widely considered to be the best stepping stone in the market for greater ambition.

With that in my mind it is safe to conclude that whilst it may take more investment to setup a white label solution brokerage compared to an IB it also offers larger return on the investment. Arguably it is often considered as the most viable option for a long-term strategy if you wish to establish yourself as a key player in the field. At Forexcs we have contributed and supported numerous international firms in Asia and all over the globe in providing them support services to set up their own forex brokerage. With our valuable years of experience and professional team we can guide you to launch your own forex brokerage within 2 weeks. Get in touch today

 

 

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