Introduction  

In the past, placing a market order would have meant visiting your financial broker’s office in person, picking up the telephone or even wiring in your request. Day traders might have spent hours on crowded trading floors, jostling to see market quotes and stock prices on billboard screens. Fast forward to today, and you can download a trading app, fund your account, analyze real-time market data, and make multiple trades – all from the phone in your pocket.  

As of 2024, there are an estimated 4,000 brokers in existence serving about 300 million retail traders. As the trading wave takes off like never before, popular brokerage platforms are earning record highs. Your average broker has an annual honeypot between $500K to $1 million. Look at senior portfolio managers and you are talking well over $10 million per year. If you have ever considered the move from trader to broker, you have come to the right place! In this article, we will walk you through the process of starting your own brokerage, the pros, and cons of managing a financial site, and a breakdown of the average overhead costs. 

Starting Your Own Broker Firm: A Comprehensive Guide 

If you aspire to become a broker, you have the option to either join an existing firm or start your own company. Each path comes with its own set of advantages and challenges. Working for an established firm may offer a more manageable workload but less control over the organization’s direction. On the other hand, starting your own firm grants you complete autonomy but requires significant investment of time, effort, and capital.  

Key Takeaways: 

• Profits at a cost: Launching your own broker has the potential to be rewarding but this comes with inherent challenges and startup costs. Consider carefully turning to a white-label provider who can set up your broker at a much lower cost while amplifying the benefits you get.
• Independent business model: As a broker you have full autonomy over your business operations. You can choose how fast and high to scale, set your fees and decide what business model will best maximize your earnings.  
• Regulatory bodies: Before your brokerage is operational, you will need to register with certain institutions. Compliance with regulatory bodies such as FINRA, SEC, and SIPC is mandatory for all broker firms.  
• Professional legitimacy: Attracting clients is one thing; retaining them is another. Build trust with your traders through running a credible and transparent platform.  
• Policy requirements: Navigating the legal and regulatory side of an online brokerage platform can be extraordinarily complex. Broker firms are bound by various policies, from anti-money laundering to employee trading, to maintain their legal and operational integrity. 
• Timeline: Launching your own broker firm will not happen overnight. Laying the groundwork for trading operations alongside the regulatory framework can be time-consuming and complicated. Nonetheless, the potential end revenue makes the lengthy timeline a worthwhile endeavor for determined entrepreneurs. 

Types of Brokers 

Before we throw the doors open on the exciting world of retail trading and the associated benefits and advantages of operating an online brokerage platform, let us first do an overview of the basics. What are the most popular markets and best avenues of investment chosen by traders? What types of brokers are there and what relative pros and cons do they represent to financial entrepreneurs?  

Online Brokers 

Discount Brokers: Traders looking for no-frills services at minimum costs would consider a discount broker. Typically, online only, discount brokers will extend basic research tools and entry level customer support to traders. Their clientele will be individual and sole traders looking to minimize costs.  

Robo-advisors: Online trading in 2024 is seeing automated trading taking off like never before. The steep surge in popularity of robo-advisors bears key testament to this trend. Automated investment platforms, often referred to as robo-advisors, use algorithms to build and oversee investment portfolios. Based on these algorithms, robo-advisors can provide personalized investment advice building on clients’ financial goals, timeframes and tolerance for risk. The more remote approach of automated advice suits passive investors who might benefit from the robo-advisors providing a “one-step removed” approach to trading.  

Direct Access Brokers: Direct is as direct does! This model of broker will connect traders directly to markets and financial exchanges. Clients of direct access brokers will benefit from powerful trading software, direct market access (DMA) and state-of-the-art features for executing orders. For all the above, direct access brokers are the go-to platform for high-hitting clients such as institutional investors alongside ambitious active traders. In short, this will be the broker of choice for any traders for whom execution speed and sophisticated trading tools are a priority.  

Offline Brokers  

Full-Service Brokers: Traders seeking a wide range of features from tailored investment guidance to comprehensive portfolio management will solicit the services of full-service brokers. Clients of full-service brokers benefit from individual consultations with expert financial advisors, in-depth market research reports and personalized portfolio strategies. For the quality and depth of financial support full-service brokers cater to high-net worth individuals and institutions.   

Traditional Brokers: Remember the trader paying a visit to his stockbroker to place a trade in person? Well, this model of brokerage platform may be on the wane, but traditional brick-and-mortar brokerages still exist! For many an investor, important decisions affecting one’s finances can only be made in-person. Clients can visit their broker at a physical branch and speak face to face regarding a variety of investments, including retirement plans, estate management, insurance, and individual portfolio generation. What they lack in automated and algorithmic features these brokers make up for quality and sustained relationships with their clients.   

Investment Banks: Investment banks are used for a wide range of financial services, including underwriting, corporate finance, mergers and acquisitions, alongside traditional trading. The higher end of brokerage platforms, investment banks liquidate capital for corporations and even governments. Catering to top-tier clients (both institutional and individual), investment banks provide advisory services and engage in capital raising and proprietary trading activities.  

Whether discussing your portfolio with financial advisors in your brokers’ offices or managing your investments from the comfort of your own home – taking control of your finances through trading is facilitated by one of these types of brokerages. Myriad brokerage platforms make up important cogs in the machinery of the markets: catering to diverse investor preferences with varying appetites for risk and individual financial goals. As a potential brokerage owner, you need to decide for yourself which platform you want to build and what trading audience you wish to accommodate.  

Consider not only your personal preferences but the market demand: what are traders looking for in the brokers of 2024? What innovative tools will be of increasing importance in trading software? Use extensive market research and predictive analytics to design a brokerage platform not only for the traders of today, but the traders of tomorrow.  

Starting Your Own Broker: Pros and Cons  

Building and managing your own brokerage platform can be enormously rewarding and highly lucrative: it also comes with startup and continual overheads and requires dedicated and responsible administration. Whether this is a more profitable venture than operating as a sole retail trader is complex: interested entrepreneurs need to weigh up the investment (initial and ongoing) of time and capital against the end revenue. Here are some points to consider:  

Retail Trader 

Potential Profits: Retail traders can earn substantial profits with the right trading strategies. By capitalizing on market opportunities and making astute predictions on price direction and asset values traders can use short and long-term strategies to benefit from market volatility. 

Flexibility: A clear advantage of retail traders is that they enjoy full flexibility: trading on their own terms, in their own times, and in total control of their investments. Should a market dip or economic growth affect their current portfolio, retail traders can adapt in real-time, moving to new areas of profits or fine-tuning their market approach to meet the demand.  

Risk Exposure: Notwithstanding the above, retail trading does involve inherent risks: the market may fluctuate unexpectedly or even crash, leveraged trading can leave a trader vulnerable to excessive losses and operating outside of a corporation or team environment can bring psychological challenges and emotional pressure. 

Broker Platform Manager 

Revenue Streams: Broker owners enjoy multiple streams of revenue beyond simply generating trading profits on an individual basis. As the owner of an online brokerage, you will generate an income from the spreads, commissions, trading fees and other costs imbued by your clients. Trading through a broker is not free but it should not be cost prohibitive. 

Scalability: Brokers such as online FX platforms and cryptocurrency exchanges can scale their businesses. As an owner of such a brokerage you can therefore expand your client base, extend your profit ventures into new markets, and diversify your revenue model therefore protecting yourself against market volatility. With enough time and a careful balancing of cost to output, successful brokerage businesses can be extremely profitable. 

Regulatory Compliance: That said, however, brokerage owners are responsible for significant company outlays and regular expenditures. Remember that as a brokerage business owner you will be responsible for the upkeep of trading software, other technology infrastructure, business operations and the ongoing regulatory compliance. None of these come cheaply and there is the mental toll of compliance with regulatory authorities and legalities which can be highly stressful.  

Both options offer opportunities for profitability, but each comes attached to different risks, challenges as well as rewards. As a retail trader, you experience total autonomy and while this can be liberating and lucrative in the right market scenarios it can also expose you to higher risks. As a broker you can reap the benefits of a scalable and adaptable platform and your final revenue may be much higher – but it will come at the cost of navigating complex regulatory requirements and regular operational hurdles.  

Like most things in life, it comes down to the individual. Some traders are simply better suited to the lone wolf approach and will profit in all senses of the word from sole management of their own trading and goals. Others may carry a more macro perspective and have an entrepreneurial mindset that sees the challenges of overseeing a brokerage business as not only manageable but even enjoyable.  

If you are unsure which category you fall into, assess your personal resources and disposable income, consider your tolerance for risk and appetite for reward to judge whether stepping from trader to broker is a step to success. Remember too that nothing is forever: you enjoy both sides of the coin and can see yourself as a successful trader as well as broker. If you simply wish to try your hand at a new venture then read around, start small, and never invest more than you are willing to lose. Fortunately for the time-pressed businessperson, there now exist companies and software programs which can take care of the entire process of launching a brokerage. This comes at an initial fee but could save you significantly in costs and time over the long run.  

Pros and Cons of Using Turnkey Software  

Starting your own brokerage in 2024 has the potential to generate significant returns – but navigating the initial steps and laying the platform groundwork can be complex and daunting. No small wonder then that companies which offer bespoke brokerages, handling all the legal and regulatory requirements, are proving increasingly popular. By outsourcing all your startup needs to an all-in-one solution (often referred to as “turnkey” software) you can hand over time-consuming and confusing tasks and free yourself up to focus on your company vision and building up your business. Let us run through the pros and cons of outsourcing your brokerage to a turnkey solution versus working through the process independently.  

Pros 

Timesaving: One of the most obvious advantages presented by end-to-end broker solutions is efficiency: business owners save considerable time by using turnkey software. By building on preexisting brokerage templates and prebuilt platforms, these companies can sometimes provide a bespoke brokerage site in a matter of weeks. In the business world, time is money, and the accelerated start date can be invaluable when it comes to making your brokerage profitable.  

Cost-Efficient: While the exact breakdown will depend on the final product, turnkey solutions are thought to be more cost-effective. The initial investment may be higher, but costs are saved overall, and the brokerage is operational and able to begin turning a profit much faster. Building a brokerage platform from scratch will entail hiring developers, regulatory experts, and other professionals. By outsourcing these needs to a bespoke broker provider, you can eliminate these costs and significantly reduce overall expenses. In short, a turnkey solution will cost you more in the short term but save you substantially in the long run.

Regulatory Compliance: One of the biggest hurdles facing a first-time broker owner is regulatory compliance. To market yourself as a transparent and regulated broker you need first to lay down the regulatory groundwork. Compliance with financial regulations can be complex and time-consuming – but invaluable in building trust and longevity with your traders.

A key advantage of companies which provide end-to-end broker solutions is that all the compliance requirements are taken care of, often seamlessly and swiftly by experts in the industry. Moreover, financial regulations change frequently, and turnkey providers will have the latest information and updates ensuring your broker is not only compliant not only for now but for always.  

Technical Support: Any online business will need ongoing technical support and platform maintenance. Companies offering to build bespoke platforms will often include technical support as part of the package. This will ensure that your brokerage platform remains operational and secure, with your technical needs invested in the hands of professional teams of experts in the field.

Cons  

Limited Customization: Companies which promise to build an all-in-one brokerage will certainly save time and money – but the cost will come at a certain sacrifice of your business control. You will be limited to the underlying technology and branding options offered by the company in question, and you may have to adapt your broker vision accordingly. For many CEOs there is ample choice among the features and designs provided by third parties. For those with specific UX and UI needs or driven by a tailored USP, then the templates and prebuilt architectures of turnkey solutions may be too restrictive.

Dependency on Provider: An oft-overlooked side effect of turnkey solutions is that once you have used their software, you will be dependent on them for any ongoing and future maintenance, platform upgrades and technical support. While small, there is also the risk that should your provider discontinue their services or be forced out of operation, your brokerage platform could be impacted.

Competition: Another sometimes underestimated consequence of white-label broker software is that the more it is used, the greater the competition. A surge in popularity will lead to more broker owners at the proverbial watering hole, while the product they are offering traders will remain the same. Relying on a turnkey provider to build your platform could result in a brokerage highly similar to competitors in the same field, making it difficult for you to stand out from the crowd.

Comparative Costs 

So, which is more expensive: using a white-label company to build your broker or taking care of the process yourself? There is no single answer, just as there is no single brokerage platform. As we have discussed throughout the course of this article, there are myriad brokers whose market access, embedded costs and trading features and functionality vary widely. Depending on the scale and quality of your trading platform, costs will range widely.  

Building a broker from scratch 

To give you an estimate, independent business owners looking at building an online FX brokerage should look at investing between $5,000 and $150,000 for your initial startup fees and overheads. The MetaTrader 4 software license alone will set you back around $100,000 to $150,000 per year. Monthly costs can be in the range of $100K. Here are the main stages to building your broker with average costs:

• Obtain a broker license ($7,500 to $55,000)
• Building your trading technology ($8,000 to $30,000)
• Ongoing maintenance and operational costs (around $2,500 per year)
• Find clearing house and pay fees monthly.
• Maintain legal and accounts department ($6,000 to $25,000 initially)
• Hiring team (average salary for U.S. broker is $72,000)

Outsourcing to a white-label provider 

Let us take a typical white label forex provider. Your setup fee could range between $5,000 and $20,000. Registering an offshore forex brokerage starts from around $1,600 (should you wish to purchase a forex license; you are looking north of $100K). The monthly fees charged for ongoing platform maintenance and other costs vary among white-label companies. Overall, your initial capital outlay for setting up an offshore forex broker will be between $7,000 and $40,000.  

In return you receive: 

• White-label trading software (TradeLocker or MT4/MT5)
• Liquidity for multiple assets and currency pairs
• A CRM (customer relationship management) platform  
• Multi-trading functionality (PAMM/social trading/copy trading)
• Varied deposit and withdrawal methods
• 24/7 customer support 

Conclusion 

To conclude, starting your own brokerage is an immensely exciting, and potentially highly lucrative, endeavor. As with any entrepreneurial activity, carefully weigh up the pros and cons before making an investment. Look not only at your bank account, but in your mirror: do you have the time and mental energy to devote to the ongoing operational responsibilities and expenses that come with managing a broker? Can you commit to the lifestyle sacrifice required by such a profession?  

Whether you choose to build a bespoke broker from the ground up, solicit the services of a white-label solution or acquire an existing firm, your responsibilities remain the same. You will need to consider your financial readiness, your ability to manage the regulatory and legal framework and your acquisition preferences. To attract and retain high-value clients, you need to showcase a reputable and transparent platform, and prepare for continuous marketing and branding. If you are prepared for the diligence and commitment required, then overseeing a successful broker can be the professional opportunity of a lifetime.  

Contact us today to find out how easy it is to start your forex broker with just a single click.