An introducing broker, or IB, is a company or individual that introduces its clients to a forex or CFD broker.
They provide their clients with trading education and support, as well as access to the financial markets.
Bringing in new clients to trade with a broker may sound similar to affiliates but IBs provide further services and consultation to build a long-term relationship and ensure the client's needs are met.
In this article, we will explain what an introducing broker (IB) is, what they do, and how to become one. We will also explore the differences between affiliates and introducing brokers further, and look at some tips for new IBs entering the market.
Introducing brokers - also called IBs for short - are individuals or companies who act as an agent between the broker and the client.
The introducing broker traditionally refers new traders to their preferred broker and will earn commissions from this activity. The commission is paid by the broker from the commission/spread they earn from each trade.
IBs typically offer a specific service and tend to maintain a long-term relationship with their clients. The type of service they provide varies, but it can be anything from providing educational courses to 1-to-1 live training and cashback sites.
It is in the best interest of the IB that the client is profitable and continues trading as long as possible.
Affiliates and IBs share a common activity - they introduce clients to a specific broker and get remunerated for this.
The main differences between affiliates and IBs are the way they generate referrals, and how they get paid by the broker.
IBs will generally earn rebates - a share of the commission or the spread the brokers charge the client. The benefit is that the IB starts earning money from having made the referral from day one - there is no need to wait for the client to meet specific requirements. Rebates are generally paid out once per day, unlike CPA, where payments tend to occur once per month, for the previous month's activity.
Another benefit IBs enjoy is that they are not limited to how much they can earn, and during what timeframe.
IBs tend to have direct contact with their clients and offer specific services, while affiliates might simply promote the broker on their website, without offering any service to them.
An example of this is a comparison website that lists various brokers on its site. If the client follows the link of the comparison site, opens a trading account, funds it, and trades on it – the comparison website might earn a commission from this without knowing the client or having any interaction with them.
Affiliates are generally on a CPA (cost per acquisition) payment plan. They will receive a fixed fee for introducing a client, as soon as the client meets the requirements set by the broker.
For example, an affiliate may earn $600 CPA when the client they’ve introduced has deposited at least $500 and traded 2 standard lots within a 60-day period.
First of all, new IBs need to have a strategy in place on how to attract clients. For example, if they want to educate new traders on how to become successful, they might have to structure an online course or webinar or even provide one-to-one training. Most likely, they will need a website and some social media presence.
The next step would be to choose a credible broker. The majority of clients prefer to trade with a regulated broker. Hence, introducing brokers should select a broker with a great reputation who is regulated in at least one reputable jurisdiction (such as FCA, ASIC, or SVG).
Every broker will ask new IBs for some documents to prove their identity. This might be a passport, driver's license, or identity card. When applying to become an IB as a company, you might need to provide the appropriate documentation for that, such as a certificate of incorporation and a bank statement in the company's name.
Once there is a deal in place, new introducing brokers can start promoting their services and focusing on growing a client base, and maintaining those same clients. The more they trade, the more they earn – hence, it should be a top priority to look out for the client's best interest.
Discover the benefits of becoming an introducing broker with Axi:
Almost any individual or company can become an IB! There are regulatory restrictions in particular countries, so it’s important to check if the country you are based in allows traders to become IB without authorisation. If there is no need to fulfill any regulatory requirements, then only the appropriate KYC documents are needed, a broker to partner with, and a good strategy!
The main priority should be to ensure that new introducing brokers are dealing with reputable and regulated brokers. This will ensure that the clients who sign up are treated fairly and that the IB payments are paid on time and correctly.
Most brokers will offer an entry-level commission plan. For new introducing brokers that don't have a client base or only a small one, they may need to start on that plan. Experienced IBs with valuable business can always contact the broker and enquire about a custom plan.
IBs should test out the broker they are looking to work with by opening a live account themselves and actively using it.
Is the account opening process easy and fast?
Is customer support reliable?
How is the execution speed?
These are all questions the clients will want to know, and IBs should make sure they are sending them to a broker that provides quality services and support to its clients.
Fill out this form to learn more about the Axi introducing broker programme.
If you are going to become an IB then these tips should help on your new journey:
Interested in becoming an introducing broker for Axi? Sign up for the partner portal today!
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