Introducing brokers and affiliate programs both attract new clients. They play an important role in the market and trader acquisition. However, there are some differences in their responsibilities that you must understand before entering the market.
In this article, we will explore in detail the key differences between introducing brokers and affiliate programs.
What is an Introducing Broker?
An introducing broker is responsible for connecting the clients with larger brokerage firms. As a result, they earn a commission. The amount they get is based on the trading activity of their referrals. However, there are different introducing broker programs, each with unique requirements and offerings.
When a new trader enters the market, they are not aware of the ongoing trends and potential risks. They need someone who can handle their account management, trade execution, and asset custody. This is where introducing brokers come in and help them connect with the experienced firms.
What are Affiliate Programs?
Affiliate programs are performance-based marketing arrangements. You can consider it as an independent identity promoting the brokerage platform. Unlike the introducing brokers, they do not work closely with any type of larger companies or firms. However, they are tied through a contractual relationship and obliged to follow the terms and conditions of the agreement.
An affiliate can be an individual or an institution, like PR management companies and media agencies. They employ effective marketing techniques and acquire potential customers. In exchange, they earn a good commission.
Key Differences
- Client Relationship
Introducing brokers typically have a strong, close, and ongoing relationship with their potential clients. They provide continuous support, advice, and manage their accounts. In contrast, the affiliates have a minimal direct client interaction beyond the initial referral.
- Revenue Model
The introducing brokers earned commission based on the trading volume and activity of their clients. It creates a steady stream of income and helps them earn a substantial amount of money in the long run.
On the other hand, affiliates earn only a one-time commission for each referral or sale. However, some programs offer ongoing commissions based on specific terms and conditions.
- Knowledge and Expertise
A high level of knowledge and expertise is required to guide the clients about the market. That’s why introducing brokers are better equipped to understand the ins and outs of trading.
However, affiliates do not require the same level of in-depth knowledge. Their primary focus is on learning new marketing strategies to attract new clients. That’s why they do not have much knowledge about the market and trading.
- Regulatory Requirements
Depending on the industry and location, introducing brokers need to get registered and obtain a proper license. Otherwise, they are not eligible to operate legally. But affiliates generally have fewer regulatory requirements and are not obliged to follow strict rules.
- Nature of Work
You can consider introducing brokers as an extension of the brokerage. They build relationships and manage their client accounts. In contrast, affiliates are more focused on marketing efforts to drive traffic and generate leads.
