In Forex, a white label basically refers to the branding of a trading platform.
The business itself can be embellished in a lot of different ways, but having a branded platform that your clients can trade on is essentially the core.
Many IBs that are new to Forex demand a white label from the onset. Sure it must feel good to have your name displayed every time your clients power up their computers and get ready to trade, but do you really need it?
The fact is that most introducing brokers probably don’t need a branded trading solution and shouldn’t be operating one in the first place. We will discuss this in greater detail in the coming sections and explain when an FX business should set its sights on a white label.
Who is a White Label Really For?
A white label trading solution is indispensable only for an IB that needs one or more of the following:
- To provide the company information and brand on the trading platform;
- To keep the identity of the licensed brokerage firm the IB is working with confidential; that is, hidden from the IB’s clients;
- To have the ability to accept account deposits directly from customers.
The above list is basic enough, but if an IB wants to offer these things to their clients, they need to be ready and willing to deal with the related consequence: an expenditure of time and money.
Costs of Operating a White Label
The expenses incurred by the average IB are relatively minor – company formation fees (if operating under an entity), website design and hosting fees (unless done in-house), advertising fees (if any), support and administrative staff expenditures (if desired), etc. Nothing out of the ordinary. IBs do not normally have to pay the brokerage firm they work with anything to operate. This is typically not the case with a white label partner.
The creation of a trading platform personalized with a company’s logo and other information requires work and added fees. For example, the branding of the most popular FX platform on the planet, MT4 (MetaTrader 4), normally costs between US$5,000 and $25,000 up front, depending on the broker that provides it. On top of that, there’s the monthly maintenance fee associated with the upkeep of the Metatrader server required to operate the platform. This can run from around $750 to $1500 a month.
The above set of platform fees are common for all types of white label arrangements, from the most basic “partial” white label setup (where the platform is branded, but the funding of accounts is done directly with the broker and not the white label provider) to a “full” white label solution, where the white label provider accepts deposits directly from their clients, thereby acting like a full-blown brokerage house. However, these may not be the only fees a white label IB might incur.
If the business wanted to accept deposits from customers, instead of allowing direct deposits with the broker, it would need to provide their clients with several account funding options. This should include the ability to fund via credit and debit cards, which is very popular in the retail FX space. To be able to do this, a business would need to sign up with some kind of payment solution provider or merchant account company – which might also include additional fees.
In addition to the aforementioned fees, if the introducer wanted to operate a full (or deposit-taking) white label, government licensing and/or registration fees might apply. This will depend on the country the white label company is formed in or operates from and the fees might be steeper than any of the other expenses the branded FX business might have.
Additional Time Required to Operate a White Label
As well as extra expenses, a white label Forex business will require more time to run than a simple IB due to the extra level of involvement required.
Revisiting the last topic of the previous section, if a white label provider needs to register in a certain country to be able to take deposits legally or obtain specific licenses from a government in order to operate, this will normally require quite a bit of time to complete. It will normally involve the filing of lengthy paperwork and applications, certification of documents, fulfillment of due diligence requirements, passing of certain exams, etc. Furthermore, this might subject the company to ongoing requirements in terms of reporting, due diligence, inspections/audits, and capitalization (depending on the jurisdiction).
On top of dealing with legal and regulatory issues, a full white label will normally need to spend the time required to open client accounts, process client applications, perform due diligence on customers (verification of ID, proof of residence, etc.), implement their own compliance and anti-money laundering procedures, and handle their own customer support. All these tasks add up to a considerable expenditure of time; additional time that most introducing brokers may not be willing to spend.
Incentive Programs – A Way to Lessen the Financial Burden?
Despite the additional expenses IBs that want to start their own white label have, there are incentive programs around that aim to lessen the financial load. Even though these programs are becoming less and less common in our industry, there are brokerage firms out there that offer them.
One common incentive is to offer the IB a discount or reimbursal on some of the fees based on the monthly trading volume of the IB’s network of customers. The exact terms vary from firm to firm. Let’s take the example of our IntroduceForex.com organization to help see this clearly. Let’s say that one of our introducing brokers was generating 2500 standard lots (100,000 units of the base currency = 1 standard lot) in volume a month and decided they wanted to operate their own white label. We would absorb the monthly $750 server maintenance fee that MetaQuotes (the distributor of the MT4 platform) would charge for every white label – meaning the IB would not have to pay the ongoing maintenance fee, saving a total of $9,000 a year. Once the monthly volume of the white label partner would reach 500M (or 5000 lots), we would reimburse the initial $5000 setup fee as well; in essence, providing the agent the benefit of a free white label in terms of platform fees (read our white label section for more information).
Conclusion – So Is a White Label for You or Not?
Even though industry incentive programs can reduce the expenses of operating a successful Forex white label, this still doesn’t make running a branded FX business a walk in the park.
The related operational costs might go far beyond those associated with the platform. In fact, they can include initial and ongoing legal, regulatory, and other fees as well. Furthermore, in addition to all the fees, there’s a substantial investment in time required to run the business properly. These are all things that must be taken into consideration by an introducing broker before attempting to move forward with a white label solution.
The fact is that if you’re already running a successful IB business without a white label, chances are you probably don’t need one. Even if there was some potential benefit for an IB to have a white label, they might not even want to. They simply may not consider the benefits of promoting their own brokerage brand enough of a benefit to outweigh the added time, complexity and headaches they will likely face.
Let’s assume that you have read this entire post and determined that you really need and can benefit from a white label. When, then, should you start one?
Here’s our opinion: When you have and are willing to dedicate the time and money required to operate one successfully.
If you don’t have the time and money, or are having second thoughts about it, do yourself a favor and keep doing whatever you’re doing, but as an IB.
Remember that on day 1, a full white label is basically a brand new brokerage firm – no prior history, no good or bad ratings, no track record whatsoever. The trust factor from clients is not there at the onset. It is zero. It needs to be built up and that doesn’t happen overnight. Because of this, an IB might be better off continuing to work with a respectable brokerage firm – one that already has a good track record. It will probably be easier to convince customers to open accounts that way, as opposed to through an unknown brand. This doesn’t mean that starting a white label is never a good idea, but if you’re not 100% ready for it or really need it, the aforementioned challenges will make the journey a treacherous one.
But relax. As an IB, you’re not alone. We work with each IB closely to determine if and when they should venture into the white label world – and if they’re ready, the best way they should do so. We’ll be ready whenever you are. Godspeed future white label!
