Have you ever thought about running your own FX brokerage? Think you can do better than your bosses? Fed up with doing all the work and only seeing a fraction of profit?
As Global Head of FX Broking at Currencycloud here are my top five tips for setting up your own currency transfer brokerage.
Five tips to starting your own FX brokerage:
- Don’t get in the red
- Organic growth is key
- You don’t need an office in London
- Get connections and referrals
- Think long-term and check the contracts
Don’t get in the red
Times have moved on; now you can have a ‘pay-as-you-use’ revenue share, rather than having to pay up-front for a series of business services.
You still build a brand and pick up the lion’s share of the revenue, but you don’t have to pay the upfront costs associated with a traditional brokerage. Nor do you have any fixed costs or contracted payments, a helpful advantage should the business not work out.
Using services such as Currencycloud white label services allows you to get going quickly. You don’t need to be regulated, to secure banking lines, or technology, and you get a proven out-of-the-box service, enabling you to focus on what you do best…. Selling.
Organic growth is key
Yes, outside investment is handy to accelerate growth sometimes, but it comes with the downside of having to answer to others, as well as having to share equity in your new business. Currency brokers tend to have low valuation multipliers but are cash cows.
A good business owner can reinvest the profits each month, then recruit salespeople. Those salespeople then pay for more salespeople. And so it begins.
You don’t need an office in London
Or at all. Yes, a fancy office at the top of a skyscraper in Canary Wharf will get you some likes on Instagram, but it is not necessary, especially at the start. London is good for getting new salespeople in as you grow.
But the first year, especially when you are minimising costs, is when you want to go somewhere cheap and cheerful. And if a client wants to come to meet you, you can use the offices at the white label provider.
As a white label provider, for example, our team will often book out our meeting rooms for our clients to use with their clients. A fancy office is more vanity than a practical necessity.
Get connections and referral agreements with other providers and brokers
It seems counter-intuitive for me to say this, but it’s the truth and the right thing to do.
Currencycloud is the leading provider in the space for vanilla spot transactions, collection accounts and deposit forwards. But we don’t do options or 0% deposits.
If you get a client that needs these, make sure you get a share of that revenue by introducing the business to another provider like Alpha or Monex.
Think long term and check the contracts
Not every white label provider gives you full ownership of your relationships. No white label provider can give you contractual ownership of your clients – the one providing the regulated activity has to do this from an FCA standpoint.
But that doesn’t mean you can’t protect yourself by making sure your provider doesn’t eventually cut you out of the loop. Currencycloud realises that protecting your investment in building a client portfolio is paramount, and will therefore contract that if either party terminates the agreement, we then terminate the contract with end clients (note we may have to keep in short-term contact with those that have forward contracts, but we won’t solicit new trades).
We also don’t have a direct-to-market sales team, and contractually assure you that we won’t pass your client information to another broker. Lastly, if and when you become regulated yourself, we actively assist the process. Not all white label providers can, or will, do this. So check the contracts and make sure you are not setting yourself up for a fall.
Take the plunge!
More and more people are taking up the opportunities offered by white label FX companies like Currencycloud.
It’s not as complicated as you might think and it can give you the flexibility and opportunities that don’t exist in the big brokerage firms.
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Harry has headed up the FX Broking Division within CurrencyCloud for the last 8 years primarily focussing on assisting start-up FX brokerages. Since starting the division, Harry has helped to set-up and grow over 100 new FX Brokers and uses this wealth of knowledge to advise and assist those taking the leap into running their own place. Launched in 2012, Currencycloud is based in London and is regulated in Europe, the U.S. and Canada, and has processed more than $50bn to over 180 countries. Backed by Google Ventures, Currencycloud works with banks and Fintechs globally including Starling Bank, Standard Bank South Africa and Brookline Bank, as well as partnering with Visa to deliver innovation in payments.