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What is a Multi-Asset Brokerage? Your Complete Guide to Launching such a Company
Brokerage Business
Iva Kalatozishvili
Business Development Manager
Vitaly Makarenko
Chief Commercial Officer
A multi-asset brokerage firm is a financial institution that unlocks access for investors and traders to different asset classes under one and the same trading platform. Users are able to invest in Forex, metals, crypto, stocks, indices, and other asset categories from the same account.
A multi-asset brokerage firm helps its owner attract as many clients as possible – the diversity of assets increases the revenue stream, provides traders with diversification opportunities, and covers as many trading strategies as possible. At the same time, launching a multi-asset broker is related to more difficulties and pitfalls.
Let’s dive deeper to understand what are the reasons to run a multi-asset brokerage firm, and what are the pitfalls a business owner may face in this way.
Top-3 Reasons to Start a Multi-Asset Brokerage Business
The number of traders and investors is growing rapidly, and they are looking for trading platforms that fully correspond to their expectations. What are the core reasons multi-asset brokerage companies attract new clients?
Multiple Revenue Streams
Traders and investors are usually focused on one or several asset categories; which means you lose clients offering a restricted set of assets. For instance, you have started a company that unlocks access to Forex pairs. Traders and investors who prefer making deals with cryptocurrencies, stocks, commodities, and other asset categories will ignore your platform. As such, narrowing the range of available assets leads to losing profitable revenue streams.
Diversification as the Main Investor’s Motto
When diving into investment strategies and risk management principles, diversification is something laid in the ground of money management. Don’t put all your eggs in one basket – so goes the basic idea of investment.
When investing in different instruments, one will not lose all his money at once. Furthermore, diversification helps investors manage the risks properly. For instance, they combine low-risk instruments (bonds), medium-risk assets (stocks, ETFs), and high-risk investments (cryptocurrencies).
When investors do not have enough options for diversification, they may find another platform where such an opportunity exists.
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Covering as Many Trading Strategies as Possible
Experienced investors and traders rely on certain strategies, and those strategies may refer to different asset classes.
Different strategies involve different asset classes, and traders frequently mix them to get the highest effect. One strategy works only on the Forex market. Another trading approach involves stocks and ETFs. Traders expect to combine various strategies on one account and understand multiple assets as a must-have feature when creating an account.
What are the Stages of Launching a Multi-Asset Brokerage Firm?
The above-mentioned reasons make it clear that a multi-asset brokerage company is something that keeps your business afloat. Meanwhile, launching such a company forces a business owner to go a more complicated way. What are the core stages, difficulties, and pitfalls?
Licensing Issues
Brokerage companies necessitate getting a license to offer their services legally; otherwise, such a company is not trusted by its target audience.
The license requirements depend on which jurisdiction you are going to obtain a license in and which assets are unlocked for your clients. When talking about offshore licenses (Saint Vincent and the Grenadines, Marshall Islands, Mauritius, and so on), the process is much simpler. Stricter jurisdictions may require several registrations to meet all the requirements.
For instance, in the USA different bodies are responsible for specific niches. The SEC (Securities and Exchange Commission) regulates the trading of stocks and ETFs. FINRA (Financial Industry Regulatory Authority) defines standards and requirements for securities companies. CFTS (the Commodity Futures Trading Commission) is a body that regulates future and options trading. As such, a multi-asset brokerage firm should be licensed in all mentioned organizations.
Which Asset Classes to Select?
Top-notch brokerage companies provide their clients with access to Forex currency pairs, bonds, stocks, commodities, metals, indices, crypto assets, etc. The more asset classes are added, the better. Meanwhile, a brokerage company needs to take into account regulatory issues. Does a financial regulator of the chosen jurisdiction require some additional licenses and regulations?
First and foremost, add asset classes characterized by high liquidity so that your clients could buy and sell them at market prices within the shortest terms.
The overall number of assets does matter as well. Industry-leading brokers offer their traders the opportunity to open orders for about 300-500 trading instruments.
Find the golden middle between diversification opportunities and risks related to the chosen asset classes.
High-End Trading Platform as a Core Component of a Brokerage Business
Building a trading platform that fully corresponds to all the traders’ expectations is the lifeblood of your brokerage business. Insufficient functionality of a trading platform or the lack of some crucial features put a cross on all the other competitive advantages. What should be taken into account when building a trading platform?
- Add as many order types as possible. Professional traders widely use stop-loss, take-profit, and trailing stop orders alongside traditional ones.
- Provide your clients with a wide range of graphic tools and analytical instruments so that they could understand where an asset’s price will go further.
- Integrate some useful instruments for different asset classes. The economic calendar is a core indicator for the Forex market. When trading stocks, users expect to access the Earnings calendar.
- Ensure your clients that their data is protected at the highest level. Two-factor authentication, encryption protocols, and other security measures are mandatory.
Newcomer traders expect a trading platform to be both functional enough and easy to use.
Security Mechanisms Among the Top Priorities
Industry-leading brokers manage billions of dollars; which is why users need to be sure their funds are protected properly. What are the must-have security features related to security?
- Clients’ funds should be placed on segregated accounts. The best option is to keep funds in Tier 1 banking accounts. As for cryptocurrencies, cold wallets are the best storage solutions for digital assets.
- Fees and commissions charged by a brokerage company should be disclosed fairly. Traders should not face any hidden fees; otherwise, they won’t trust your firm anymore. Furthermore, point out the risks connected to different asset classes.
- Partner with high-end payment gateways that give priority to security issues. The same concerns liquidity providers and cloud providers.
- Pass the planned audit timely to ensure your clients that your brokerage company is based upon the transparency principles.
Meeting the Interests of Different Client Categories
Multi-asset brokers need to meet the expectations of both beginner clients and professional investors. As such, those companies introduce a network of trading accounts. While a basic trading account is enough for beginners, experienced traders enjoy the benefits of premium/VIP accounts that unlock some additional features.
When talking about diverse client categories, multi-asset brokerage companies need to provide their clients with some useful materials and instruments:
- Beginner traders expect to access educational materials, detailed guides, and tutorials that are able to upgrade their trading skills.
- Experienced traders expect to find some expert materials, market analysis, reports, and other tools tailored to professionals.
Activities that Retain Your Traders
Launching a multi-asset brokerage company that meets the requirements of both newcomers and professional traders is rather a complicated task; meanwhile, once you have run such a company, the game is not over. Business owners need to work constantly on the activities and instruments to retain their clients.
- Bonuses and promo codes. Top-notch brokerage companies add bonus programs and promo codes that grant users additional benefits.
- Content updates. Add useful materials, market research, and other unique content so that your clients could both upgrade their skills and get useful information.
- High-level customer support. The interaction between platform representatives and traders is exceptionally important. Users expect to get detailed answers to all questions and hurdles they face.
The Importance of Marketing and Promotions
The brokerage niche is an exceptionally competitive one; which is why newcomer companies should think about well-planned marketing and promotion campaigns. Otherwise, it is easy to lose your place under the sun.
Combine traditional marketing channels with brand-new promotion tools to experience the best results.
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Innovations as a Driving Force for Development
Financial markets undergo some crucial changes, being influenced by up-to-date technologies; which is why it is exceptionally important for brokerage companies to keep up with the times.
Business owners need to integrate innovations that enhance the functionality of their firms: AI-powered signals, machine-learning technologies, and other advancements help keep your business afloat.
Furthermore, innovations make it possible to augment the security level to provide traders and investors with the safest services.
Key Trends Related to Multi-Asset Brokerage Business in 2024
The constant changes and updates in the brokerage landscape make it possible for newcomer brokerage companies to pave their paths toward success. What are the latest brokerage trends to take into account?
The Rise of Prop Trading Companies
The number of beginner traders grows rapidly, and many newcomer players expect to access funded trading programs to use significant sums. Furthermore, the niche experiences plenty of well-trained users who are ready to bring profits. Prop trading is understood as a win-win model for both business owners and traders. The first ones invest their funds and get passive income while traders get access to significant funds and earn up to 80% of the net profit.
The Growing Role of Licensing
Some 5-7 years ago unlicensed brokers had chances to attract new clients; meanwhile, much has changed since then. Traders expect to join a multi-asset brokerage company they can trust. Offshore licenses are still the solution, but professional and experienced market players prefer to choose companies that are licensed by top-rated regulators (CySEC, FCA, ASIC, SEC, and so on).
Passive Income Opportunities
On the one hand, newcomer traders want to access educational materials and tools to upgrade their skills and have better results. On the other hand, beginners are eager to hail instruments that empower them to earn some funds having low skills. Copy trading, PAMM, and MAM accounts, and automated signals fall into this category. The popularity of automated signals is growing explosively. Business owners use AI-powered technologies to generate signals where an asset’s price will go further. Traders may either rely on such signals or ignore them.
Advanced Analytic Tools
Advanced trading statistics and analytical instruments are something professional traders want to get from a trading platform. They dive into the detailed information on their latest deals, and statistics of successful and losing orders. Furthermore, such detailed statistics should be available for different asset classes.
Bottom Line: A Multi-Asset Brokerage Business as a Must-Have for Beginner Niche Players
Gone are the times when one asset class was enough for traders and investors. Up-to-date users of trading platforms expect to access the all-in-one solution. Multi-asset brokerage companies adapt to all trading strategies and allow traders and investors to use diversification principles. Taking into account the fast-growing competition in the brokerage niche, multi-asset brokers attract crowds of clients while single-asset brokerage is a model that hardly matches the needs and expectations of beginner business owners.
