Difference Between Introducing Broker (IB) and White Label
October 15, 2016
A brokerage house strives for continuously reaching new customers and there are several ways to attract clients, starting with classical advertising on social media and popular search engines, as well as participating in trading shows, offering promotions for particular periods of time, etc. If you want, all these are conventional ways to attract new clients, but there are other that not only increase the customer base, but also the broker’s revenues.
Any serious broker is having Introducing Broker (IB) and While Label programs to complete their offering and as solid ways to increase customer base and diversify the revenue stream. What is the difference between the two and why would a broker offer such programs?
An Introducing Broker is the basic way for the brokerage house to partner with different entities (traders, investment companies, other brokerage houses with a client base, money managers, etc.) with the goal of attracting new clients from the brokerage house services.
In plain English, these entities are recommending the broker’s services and in return, they are being rewarded for the new clients that the broker gets. The reward may come as a fixed return, or a percentage one based on the future trading volume the new clients will make with the broker.
As mentioned earlier, it is the basic form of associating between a forex broker and any other individual or company. Referring clients to a broker can be done in multiple ways, from advertising the broker’s banners on the IB’s website, email marketing campaigns highlighting special promotions the broker may have, etc.
An IB will receive a unique ID from the broker, typically a unique link that the broker will use it to track the new customers that are being introduced and access to a special area that will allow the IB to download promotional materials in order to start soliciting clients.
If the client is opening a trading account with the broker via the reference link provided by the IB, the IB is going to be rewarded either with a flat fee (this can vary from broker to broker) or a specific amount that is based on the future volume the client will trade. Some other rewarding ways include a percentage from the broker’s spreads, but this is not that common anymore.
White Label Programs
A White Label program is totally different from an IB one in the sense that people interested in such a program want to open their own forex brokerage house and brand and not only to refer clients to the broker.
The broker will provide the White Label with the trading platform and back-office support, and even allow the White Labe to build its own brand. A While Label will earn from the trading volume of its clients and it is functioning more or less like a regular brokerage house.
There are some things that a White Label cannot control, though, like the currency pairs that are offered or the closing and opening market times, but in principle, a White Label runs like a normal broker.
For the White Label is a cheaper way to setup up a business as the broker can assist from building a website, marketing, etc., and for the broker, it is a new way to diversify the income stream through licensing revenues.