White label is the best choice for your company? Maybe not that simple

Source: Fazzaco 2020-08-18

Forex is the regulated financial market that provides the path of least resistance to companies and individuals that want to refer business for compensation. Participation can be as basic as becoming an Affiliate or Introducing Broker (see IB section) of an existing brokerage firm or as elaborate as running your own brokerage under a rebranded referral solution known as a “White or Private Label.”

What Trading Platform do I Offer my Customers?

Choosing the right trading platform or software is one of the critical first steps of running a successful white label program. Unfortunately, many inexperienced companies opt for the free, proprietary platforms that some brokerage firms offer. This is a big mistake. If your potential customers are not familiar with the platform that you decide to go with, it’ll be more difficult to convince them to open accounts with your firm. Furthermore, if you ever want to part ways with the existing brokerage firm in the picture and move your clients to another broker, the learning curve associated with a new platform might discourage your clients from moving.

The best way to minimize the risk associated with marrying your firm to the wrong platform is to go with one that’s the closest thing possible to a market standard.

When it comes to retail Forex, the software that most currency traders use and prefer is Metatrader 4, a.k.a., MT4. The Metatrader platform, developed by the Russian company MetaQuotes, has been in existence since 2003 and has gone through various version changes, including MetaTrader 3 in 2003, MetaTrader 4 in 2005 and MetaTrader 5 in 2010. Despite its most recent release, MT5 continues to be much less popular than MT4 and most brokers today use MT4 instead of MT5.

An advanced free charting suite, ample historical data, unlimited free demos, and its solid support for algorithmic trading (via “robots” or “expert advisors” [EAs]) are just some of the beneficial features that continue to make MT4 the platform of choice for millions of traders and hundreds of FX brokers worldwide.

The huge popularity and dominant position MetaTrader 4 enjoys in the foreign exchange market makes it the natural choice for any white label provider. It is the platform that we strongly recommend all of our clients to use. Doing otherwise would be like trying to stop a tsunami in its tracks. Don’t try it at home!

As far as fees are concerned, MetaQuotes charges standard upfront and monthly fees to all licensed brokerage firms for each MT4 white label they sub-license to their referral partners. There’s no exception to this rule.

As of the date of publication of this guide, these fees amount to US$5,000 up front per sub-license and US$1,000 monthly to cover the server that’s required for the proper operation of every rebranded MT4 platform. Some brokerage firms charge additional fees on top of this, but most do not. An even fewer number may pay these fees on your behalf or rebate the charges back to you once your client network is generating a certain amount of trading volume every month.

Costs of Running a White Label Partnership

In addition to fees for setting up, branding and managing your platform (see previous section), operating a private label business is just like running any other business. There are expenses associated with it.

These expenses will normally be lower for partial white label setups, since they will not have the added complications [or fees] associated with accepting customer deposits directly (such as making initial and ongoing escrow deposits, setting up merchant accounts for credit card funding, etc.). Nevertheless, staffing fees are still likely to apply, since it’s probably impossible [and flat our crazy] to try to operate a white label partnership as a one-man show. Depending on your exact business model, you may have to hire people to handle customer education and support, marketing, accounting, management and IT.

Will your business be Internet-based, brick-and-mortar, or both? If you plan on having a physical location to meet or train clients, you need to factor in office leasing costs, occupational/licensing fees, security expenses, etc. Depending on your geographical location, this can add a few thousand dollars a month to your list of business expenses.

However you decide to structure your white label business, make sure that you first think carefully about all of the expenses you will likely incur prior to getting started, then handle your budget intelligently to give your business a better chance to succeed over the long run.

Since nowadays most people won’t sit and read through thousands of words on any topic whatsoever, think of this video as an entertaining substitute. It is my goal that you pay heed to the advice on this video, especially if you are wrestling with the idea of whether or not to run your own FX brokerage firm. Don’t join the ranks of the many unsuccessful Forex businesses that ignored common sense; common sense that would have saved them a lot of time, money and headaches.

There’s No Free Lunch – A Lack of Money to Run Your White Label

The first reason covered on the video why you should not start your own white label business in the foreign exchange market is a lack of money.

Even though there are free white label solutions in existence, they are built on subpar trading platforms. If you even want to have an iota of a chance to make it in the brokerage space, don’t you think that you should offer a trading platform clients actually want to trade on? Of course you should.

The most sought out platform by currency traders is MT4 (MetaTrader 4) and guess what? Unfortunately it’s not free!

These standard costs of running an MT4-based trading solution are not insignificant. As a result, no sane minded licensed brokerage firm [the ones that sub-license MT4 to their white label partners] would foot such a bill on behalf of a client. Doing so would be extremely risky for the brokerage firm, since they have no guarantee that the white label partner would ever generate enough trading volume for the brokerage firm to recover their platform expenditures.

If at this point you’re thinking, “Spending $5,000 up front and $1,000 a month is too expensive for me,” you are basically not ready to start your own white label. It’s harsh advice, but why would you want me to sugar-coat the truth?

The reality is that if you don’t already have a large network of traders that generate revenue for your company (like under an Introducing Broker or IB relationship with a licensed brokerage firm), you’re energy should be focused in trying to develop that network. Furthermore, it is much more cost effective to build that trading network during your first few years of operations without the use of a white label platform [since the costs would be a lot lower and the setup a lot simpler]. Just work with a reputable brokerage firm in an agent (or IB) relationship and launch your own white label solution when you have proven to yourself that you can succeed in this business. Isn’t that much more practical advice? Visit our IB section.

No Experience and You Still Want to Start?!?

To begin with, it’s really madness to want to establish your own white label brokerage firm in foreign exchange without having much Forex experience. Yet, many organizations that are clueless about FX want to roll the dice in our industry all the time. Why?!?

Previous business success outside of Forex does not guarantee success in it. This is a fact.

I have seen one too many businesses venture into Forex and flat out fail due to a lack of trading and currency market experience. This lack of success can even occur when your business is well capitalized from the get-go and plans on hiring the people to run the white label for you.

That is why I recommend that every organization gain the required knowledge about our industry before rushing into the white label program, regardless of the amount of funds you have to start.

（source: IntroduceForex）

cTrader

forex trading

White label is the best choice for your company? Maybe not that simple

Subscribe to Our Newsletter!

Subscribe to Our Newsletter!