It's nice when Forex clients keep coming back to you for more of what you have to offer, but what if you have nothing to offer? Even though that would be a truly dire scenario, we feel that most IBs could probably provide some type of service their clients will value.
To help referring agents determine what they should be offering clients so that their businesses have the best chances possible to succeed, we came up with a list of services that customers tend to find attractive. This list is related to the list of business candidates that was provided earlier, but provides a more detailed breakdown.
Services Clients Find Valuable
Good Support – "Support?! Isn't this what the broker is supposed to provide?" Yes, the FX broker with whom the IB works will provide clients with support and assistance related to their accounts, funding, etc., but the introducer can also jump on the bandwagon.
There are different ways the IB can provide support to his or her clients. First of all, he or she can try to make customers' lives easier by helping with certain problems customers may face. After all, IBs are communicating with the broker on a frequent basis and are also up-to-date on customer affairs. It is only natural for them to lend a helping hand when necessary. In the long-run, this will build rapport with clients, which is a plus for any business. Secondly, the agent might offer other unique, value-added services (see below) that brokerage firms don't. If this is the case, support for these services must come from the IB's end to maximize customer experience.
Regardless of the level of support introducing brokers provide their clients, it is important that they use convenient means to do so. Some suggestions might be to provide a live-chat button on their website (for new and existing clients), the ability to chat via Skype, phone and email support, etc.
Attractive Money Management Services – Many clients come to FX not to trade themselves, but to use Forex as an asset class — an asset class that's uncorrelated to their other investments. For that to occur, they need the services of a good trader or money manager.
With all the Madoff-type scams that have come to light in the last decade, clients need to feel that their money will be handled by a skilled professional, someone who will always use prudence and strict risk management when entrusted with customer funds. If the IB has experience managing money, they might be able to provide a managed account service to attract customers. Otherwise, they might seek the help of a third-party manager to handle their investment accounts.
The key is to make sure that the portfolio manager focuses on risk management instead of on obsessing over unsustainably high returns. We have seen many more traders aiming for off-the-chart returns crash and burn than survive in the FX market. Furthermore, research shows that the bigger the investor is, the less likely it is that he or she will find returns that seem too good to be true believable. Normally, it is the inexperienced investor with unrealistic return-vs-risk objectives who demands impossible returns as if they were a commodity. It's no wonder investors like these continue blowing up their accounts while searching for the Holy Grail. As a managed account IB, avoid trying to please this type of investor at all costs. Heeding this advice will ensure that your business as an introducing broker will remain successful over the long haul.
Educational Services/Seminars/Webinars/Training – IB candidates that can provide valuable education or training to their clients have a huge advantage in the retail IB space. With over 80% of the traders in any market losing money, there is no doubt that clients are yearning to be taught. When clients trust their educational provider, they are naturally going to trust their provider's broker and platform recommendations. That is why the referral business is a perfect complement to an attractive training service.
Even though education can be offered in different ways and under a wide variety of business models, there are two main models that predominate: the paid (or subscription) model and the incentive model. Under the paid model, clients pay a one-time and/or monthly fee to the educational provider for access to their products or services, whether or not the clients open an account with the brokerage firm with which the provider has a referring agreement. The advantage of this arrangement is that the provider gets paid for his or her services regardless of with which currency broker the client decides to trade. The disadvantage is that the provider's transactional revenue (from his or her clients' trades) will probably be lower, because the cost of education will act as an initial hurdle that will likely reduce the overall lead-to-account conversion. This is where the incentive model has an edge.
Under the incentive-based model, the client is provided with free education or training when he or she opens an account with the "preferred" broker; i.e., the one the IB has a relationship with. Thus, the service is provided to clients as an incentive. Under the incentive model, the percentage (or "Quotient of Conversion") of account sign-ups and transactional revenue will be higher, but the referring agent won't enjoy the immediate payment that the other educational model affords. From our experience, the incentive model can generate exponentially higher revenues than the paid model once the introducing broker has a good client base trading under his or her network.
It is also important to note that an educational model does not have to be exclusively paid or entirely incentive based. It can be a combination of both. For example, a paid educational provider can either train clients for free when they open an account with the preferred firm or provide their services at a deep discount. Clients who want to trade with another broker can be made to pay full price for the education