Hello, my name is Alex and I’m in charge of Business Development here at Kenmore Design. In today’s episode I want to point out some common forex brokers mistakes when they set up new brokerages. Knowledge is power, and sometimes we refuse to see that we are taking the wrong way although in the long run this behaviour will take its toll. It’s useful to follow tips and seasoned professional practices to improve our business in different ways, but what about the mistakes? We all know that we learn more from mistakes than from successes. So, what are we waiting for?
Trying to build an overly sophisticated operation on a budget before official launch.
I think it has occurred to everybody – not only limited to the Forex industry. Brokerage owners such as yourselves are creative individuals; otherwise, you would not be where you are. The problem arises when you try to implement all of your ideas at once, i.e. build a multi-million brokerage on a tight budget.
Any tech company will tell you that they can deliver their product FAST, CHEAP, GOOD – but you have to pick two. Otherwise you will make common forex brokers mistakes, and I think you are not willing to do that.
The best way to avoid this is by having a detailed business plan and then making sure your vendors are aware of timelines.
Not diversifying your vendors
This is not so much a mistake as it is a trap. We see over and over how startup brokers prefer to go with one single vendor that provides it all. Just to give you an example, if you take your trading platform, price-feed, liquidity, website, CRM, payment solution, risk management, marketing… from a single vendor you put your entire business into a single pair of hands. Nothing stops this vendor from raising your cost on any single one of these solutions. It’s not like you have any leverage over them. They will control your entire business and will make sure they reap the majority of your profits.
There exists a very simple solution to avoid this trap. All you need to have is a dedicated project manager that would manage all your vendors. This position can easily be a full time job for a trustworthy individual. He or she will save you a lot of money and eventually they can get a CTO position if they prove that they can manage vendors. They can manage an internal tech team as well.
Not paying enough attention to marketing
A very common mistake among those brokers who rely on IBs or Money Managers to bring in business. IB business is great, but if you have not updated your website since the inception, you are doing something wrong. If you don’t constantly tell your clients what is happening this week on the markets, inside your brokerage, if you don’t hold seminars or webinars your business image will start to look stale.
The solution to this problem deserves an episode of its own, and we’ll do that in the future. There are many ways to improve your marketing. The easiest one is to have a remote content provider. These types of vendors are usually readily available on freelance portals.
The correct approach to this is of course to have an internal marketing personnel. Daily tweet, weekly blog post, monthly video (of a webinar perhaps) is a good place to start.
Not paying enough attention to your IBs and Money Managers
So this is the other side of the previous issue. Often brokers who focus on IBs don’t pay attention to marketing, and those who focus on marketing forget about their IBs.
The solution is so simple but so few have figured it out: Have your IBs contribute to your marketing!
Simple monetary intensive, paid by traders invited by the IBs, and a requirement to provide the brokerage with some content. Surely it won’t work everywhere, but if you implement it on a technical level, for example, when IB signs up, you make him aware that he will receive a better commission if he creates some content that you will choose to post on your blog. Then IBs can link to their articles on your blog, and these links articles will double as IB Referral URLs.
IBs will quickly realise that their conversions go up if they are recognised by the brokerage as contributors.
Assuming that you are limited to a single audience.
This is very much a human issue, we are what we are used to. We tend to go after familiar markets, or market segments that we have experience with. This causes the expected. Once in a while every market experiences a downturn. In most cases it recovers – in some exceptional cases it doesn’t.
The English as a second language world is vast. From South Africa to Indonesia there are many many markets and the more markets you have connections to, the less susceptible you are to the dangers of market downturns.
Being aware of these common forex brokers mistakes will give you a new perspective, a new angle to approach your business. If you know more forex broker mistakes, let us know with your comments.