Introduction

The world of online brokerage is experiencing an extraordinary surge in demand, and the numbers tell a compelling story. According to a survey on the 2021 state of the independent retail investor conducted by NASDAQ, the retail investor base has been steadily growing. The rise of independent retail investors signifies a profound shift in the financial industry. People are increasingly taking charge of their financial future by seeking investment opportunities and trading platforms. That’s what you want to provide them through your online brokerage firm.

The number of Forex and Stock brokerages in operation today is astonishing! A quick search on Google or any other search engine will show you hundreds of brokers to choose from. In this dynamic landscape, starting your own online brokerage firm has never been more enticing, but you need to put the right things in place so yours would stand out from the other online brokerages. 

Whether you’re a seasoned financial expert or an aspiring entrepreneur, this article will guide you through the essential steps and strategies to launch a successful online brokerage. We’ll explore the critical elements to use in ensuring a successful launch of your online brokerage. 

What is an online brokerage company?

An online brokerage firm is different from an estate brokerage. But like an estate brokerage, an online brokerage acts as a middleman between financial assets buyers and sellers.

Known by other names such as Online Broker, or simply an Online Trading Platform, an online brokerage is a brokerage firm that people interact with online, rather than in a brick-and-mortar office, which enables them to exchange financial securities. 

The financial securities or assets can be stocks; forex; mutual funds; bonds; futures; options; commodities; contract-for-differences, simply called CFDs; and cryptocurrencies.

The earliest online brokerage

With the launch of Globex in 1992 as the first electronic trading platform, face-to-face interaction between brokers and clients was drastically reduced. 

Before 1992  when Globex, the first true online trading platform hit the market, brokerage firms were physical and investors had to place their orders in person, or by telephone.

Today’s online brokerage company has opened up the door to more options in financial assets that can be traded.

An online brokerage provides resources that make it possible for customers to handle more aspects of investment trading by themselves.

The investor now has more control. We are talking about way faster execution speed compared to anything an investor in the 80s could have hoped to get through a telephone order.

Today’s investor now has more edge over an investor in the 80s as, through the internet which today’s brokerage company utilizes, he can have more positions open at the same time.

Before anything else, though, take note of these mistakes and avoid them.

First of all, avoid these mistakes:

Many brokerage start-ups have launched and continued operating successfully, conversely, many others have failed as soon as operations commenced.

They failed majorly because of some mistakes we’ll outline below. CodeSurd offers bespoke technology and business solutions guaranteed to make your brokerage start-up a success story.

1. Not establishing a unique identity

In launching your brokerage start-up, you must decide on what type of brand image you want to build. Decide on an image that sets you apart from the mainstream brokers.

Using similar account types, the same platform, and attracting clients via bonuses or other inducements, might not set you apart.

Though you’re eager to get operational, you can’t afford to outsource your website to amateur web developers. 

Enlist the top web development service that would design a website that would make your business unique from the rest.

Come up with unique features to make you stand out in an oversaturated industry. Outsourcing to viable web developers and content creators is a long-term investment.

2. Duplicating the acquisition strategy of established brokers

Acquiring clients for your brokerage is important and is your next move after creating your unique brand image.

As a start-up, copying the strategies of already established players in the industry in client acquisition is counter-productive. 

As a startup, you can’t compare your budget with theirs. Rather, come up with a marketing plan that’s tuned to your budget and audience. 

Concentrating on one country as a startup brokerage is a great way to start with a modest budget.

With that, you’ll be able to show more local presence than your competitors; you’ll get to understand the local culture, hence, your audience needs; save cost by only localizing your material in very few languages.

When you’ve garnered enough funding and clients, then you can target more jurisdictions.

3. Poor brand management

Avoid the pitfall of adopting a short-term mentality to the detriment of the long-term sustainability of your brand. 

Part of your long-term brand sustainability is the use of viable web developers and content creators. Top-notch web developers would incorporate seamless navigation, a great interface, and responsive pages.

Content creators would create content unique and relevant to your brand. 

It’s also vital to ensure fast withdrawals for your clients. These are long-term investments that give your brokerage credibility and guarantee an expanded client base.

Poor navigation, bad user interface, 404 errors, and poor client support would cause your brokerage to be stamped as a scam.

4. Overdoing profit margins

It’s normal to apply a mark-up fee on the interbank price, but don’t overdo it.

Try as much as you can to study your competition’s markups so that your brokerage can offer better spreads.

If you overcharge pips per trade, you could start seeing your clients go shopping for another broker with better charges. Be transparent about your commissions. 

5. Insufficient knowledge of trading products

You have set up your basic services, but there are other available products at the disposal of your brokerage business. 

These products such as Copy Trading and Automated Trading are great selling points for your brokerage. 

Ensuring that your sales team knows of, understands, and can sell such groundbreaking products to your clients would put you at an advantage. 

Know, incorporate, and promote products on your brokerage platform such as Automated Trading, Manual Trading, Copy Trading, In-platform signals, etc.

Starting your Brokerage Firm

Having considered some mistakes that most brokerage start-ups make when launching, let’s outline the steps to follow in launching your brokerage start-up.

1. Plan your business

Embarking on the journey to establish your online brokerage firm requires meticulous planning. While you might have already delved into this crucial phase, let’s ensure your preparation is as comprehensive as possible because, in the world of online brokerage, thoroughness can be your greatest asset.

Engage Expert Consultation: The foundational step in your planning process involves enlisting the assistance of seasoned financial consultants or experts in the field of online brokerage. These professionals possess invaluable insights and can help you craft a well-informed strategy.

Define Your Target Market: A thorough understanding of your target audience is fundamental. Consider who your prospective clients are, their investment preferences, risk tolerance, and financial goals. Crafting a client persona can be immensely beneficial in tailoring your services.

Jurisdiction and Regulatory Considerations: Determine the jurisdiction in which you intend to operate your online brokerage firm. Different regions have varying regulatory frameworks and compliance requirements. Collaborate with legal experts to navigate the intricate web of financial regulations and ensure full compliance.

Pricing Strategy: Deciding how much to charge your clients is pivotal. Your pricing strategy should strike a balance between competitiveness and profitability. It’s essential to analyze the fee structures of your competitors while considering the value you provide.

Budget Allocation: Financial planning is at the heart of your business plan. Allocate resources judiciously across different aspects of your brokerage. Factor in staffing and employment costs, technology investments, marketing campaigns, and robust risk management protocols.

Taking a meticulous approach to planning sets the stage for a resilient and successful online brokerage firm.

2. Company registration

After crafting a comprehensive plan, the next significant stride towards materializing your online brokerage venture involves company registration. The jurisdiction you choose for your brokerage’s legal entity doesn’t necessarily have to align with your current place of residence, although it’s entirely plausible if you wish.

During the registration process, you’re essentially birthing a legal entity to represent your brokerage firm. Opting to register as a Limited Liability Company (LLC) is a judicious choice. This decision carries a distinct advantage: it shields you from personal liability in the unfortunate event that your brokerage faces legal action.

Typically, to operate a brokerage business, licensing requirements may come into play. However, the specifics can vary significantly based on the jurisdiction in which you intend to operate. It’s a nuanced area, and your best course of action is to seek professional guidance.

Engaging a knowledgeable consultant proves invaluable at this juncture. Their expertise can guide you in selecting the most suitable jurisdiction, ensuring that you comply with local regulations and determining whether licensing is a prerequisite for your operation.

Navigating the intricacies of company registration and licensing, particularly in the realm of online brokerage, demands a nuanced approach.

3. Register for taxes

With your brokerage officially registered as a legal entity in your chosen jurisdiction, it enters the realm of financial compliance. Operating as a legitimate and taxable entity within your country of choice requires you to fulfil certain tax obligations before commencing operations.

The specific taxes your brokerage must register for can vary based on the business structure you’ve adopted. The intricacies of taxation can be rather complex, and it’s crucial to comprehend the nuances associated with your particular business model.

In essence, you’ll need to identify the taxes that are applicable to your brokerage business structure. This might encompass corporate income taxes, value-added taxes (VAT), or other levies, depending on your jurisdiction and the nature of your operations.

Navigating the realm of taxation is a pivotal aspect of establishing a compliant and financially responsible brokerage firm. To ensure accuracy and adherence to local tax regulations, it’s advisable to engage a tax consultant or accountant well-versed in the financial intricacies of brokerage businesses.

4. Set up a Business Bank Account

Setting up a dedicated business bank account is a pivotal step in the journey to establish your online brokerage firm. It’s a pragmatic necessity, as this account serves as the financial conduit for handling client payments. Here’s why it’s indispensable:

Segregation of Funds: A business bank account provides a clear demarcation between your personal finances and your brokerage’s financial affairs. This demarcation is vital for financial transparency and regulatory compliance.

Streamlined Accounting: With a dedicated account, your brokerage’s financial transactions, income, and expenses are consolidated, simplifying the accounting process.

However, the landscape of banking for new brokerage companies has evolved, particularly in the realm of payment methods. It has become more intricate, emphasizing the need for expert guidance.

To navigate this evolving landscape effectively, especially concerning payment technologies, partnering with a consultant well-versed in brokerage banking intricacies is essential. Their expertise can help you select the right financial institution, overcome challenges, and optimize your banking setup for seamless operations.

5. Set up a book-keeping system

The significance of meticulous financial record-keeping cannot be overstated in the realm of online brokerage. As you embark on your entrepreneurial journey, instituting an efficient bookkeeping system is paramount for these reasons:

Financial Oversight: A robust bookkeeping system allows you to maintain a comprehensive record of your brokerage’s expenditures and income sources. This financial transparency provides a real-time understanding of your firm’s financial health.

Streamlined Taxation: Accurate and detailed financial records significantly simplify your annual tax filing. With a well-organised record-keeping system, you can efficiently identify deductible expenses, leading to potential tax savings for your brokerage.

Maintaining precise financial records isn’t just a matter of compliance; it’s a strategic advantage. It empowers you with the insights needed to make informed financial decisions and keep your brokerage on a path to sustainable growth.

Whether you choose to manage your bookkeeping in-house or engage an accounting professional, the key is to establish a system that captures all financial transactions. This system becomes the bedrock upon which sound financial management and growth rest.

6. Get business insurance 

In operating an online brokerage, forward-thinking extends beyond business strategies and financial management; it encompasses safeguarding your venture against unforeseen challenges. A crucial aspect of this protection is obtaining comprehensive business insurance. Here’s why business insurance is indispensable:

Asset Safeguard: Business insurance acts as a financial safety net, shielding your brokerage from the potentially crippling costs associated with property damage and liability claims. In the face of unexpected events, insurance can shoulder these expenses, preserving your business assets.

Personal Liability Protection: Operating without adequate business insurance can expose you to personal liability for substantial damages and legal claims against your brokerage. This financial burden can be overwhelming and may put your personal finances at risk.

An example of great coverage to start with as a brokerage start-up would be General Liability Insurance. It offers coverage for common risks and liabilities that businesses frequently encounter.

View business insurance as a fundamental investment in your brokerage’s long-term stability. It not only mitigates financial risks but also reinforces your reputation as a responsible and dependable service provider.

7. Partner with the right technology provider

Technological prowess is the linchpin to success for online brokerages. Partnering with the right technology provider becomes a pivotal step in your journey to establish a thriving online brokerage.

Contemporary businesses have transcended the confines of brick-and-mortar establishments, and your brokerage should be no exception. The digital age demands a robust online presence, and your business requires cutting-edge digital technology to thrive.

A Powerful Website: Your brokerage’s digital storefront is its website, a critical component of your online identity. At CodeSurd, crafting exceptional websites is our forte. Our expertise ensures that your website not only represents your brand but also offers a user-friendly experience, attracting and retaining clients.

Trader’s Cabinet: A Trader’s Cabinet serves as a portal for your clients, granting them access to a suite of tools that automate various day-to-day operations. It simplifies their interactions with your brokerage, enhancing their overall experience.

White Label Solutions: Your brokerage benefits from “White Label Technology,” encompassing software like MT4/MT5 traders, cTrader, or Condor, tailored to your preferences. These solutions facilitate seamless operations, adding a layer of efficiency to your business.

CRM and Back Office: Effective customer relationship management and streamlined back-office processes are non-negotiable. They enable you to efficiently handle client interactions, manage accounts, and streamline administrative tasks.

Payment Gateways and API Integrations: Seamless payment processing is vital for your brokerage’s success. Integration with payment gateways and APIs ensures that financial transactions are secure and efficient.

Risk Management: Safeguarding your brokerage against potential risks is paramount. A robust Risk Manager tool is essential to monitor and manage risks effectively, providing peace of mind for both you and your clients.

By collaborating with the right technology provider, you equip your brokerage with the digital tools and solutions needed to excel in the competitive online brokerage landscape. At CodeSurd, we specialize in empowering businesses like yours with cutting-edge technology, ensuring your venture thrives in the digital age.

8. Set up a robust client service

Setting up and operating a robust, responsive client support system is a great way to retain your clients.

Some clients may find the account opening process and even the entire trading process daunting. They might end up needing help during the account funding or withdrawal process.

If your support is easy to reach, fast, and polite, you won’t have to worry about retaining your clients. Offer timely support to your clients.

Conclusion

We hope these guidelines were useful in guiding you on how to set up and launch your brokerage firm.

We offer turnkey solutions that will put you on the right course in setting up your pet project. You can try out CodeSurd’s Live Trader Surd to seamlessly launch and operate your live trading platform.

Live Trader Surd provides you with all White Label solutions: MT4/MT5, cTrader, and more.

We can set your business up with a sturdy CRM and Back Office framework, all of that together with continued partnership and support.