Why Brokers Should Care About Their Traders’ Risk Management

FinanceFeeds Editorial Team

Since the SNB Black Swan Event of 2015, many brokers have changed their own risk management approach, moving to either a B- or C-book method. Unfortunately for traders, this approach hinges on trader failure for broker success. As a result, many brokers neglect trader risk management, preferring to take one-off profits over helping traders grow into long-term participants.

 

 

 

 

 

 

Providing traders tools and content to assist in building their risk management strategy might just be the key to long-term growth for brokers.

How Offering Risk Management Can Help You

Did you know that 25% of traders quit within the first 46 days of trading? Even worse, 50% quit after the first 155 days. Furthermore, 88% of the traders who quit do so because of losses.

For brokers, this means constantly working on new trader acquisitions, an approach that is becoming increasingly more challenging as competition grows. 

But what if brokers focused efforts on helping traders build a risk management strategy? Below are some of the benefits brokers are likely to see. 

Client Retention

Acquiring a single new client can cost up to 5 times more than retaining an existing one. More importantly, if you can increase client retention by just 5%, research shows you could increase profits by anywhere between 25% and 95%. So, rather than working hard to acquire clients for the initial deposit, giving your clients the best possible trading experience and refocusing on encouraging re-deposit is likely to be more profitable than dealing with high trader churn.

Build Brand Loyalty

Today, every broker boasts cutting-edge trading technology, tools for analysis, and even customer support. This means that differentiating your offering and building brand loyalty is becoming increasingly more important.  A great way to do this is by addressing brokers biggest pain points, a prominent one being risk management. Providing educational material and strategy boosting tools can do just that.  

Reduce Churn

Trader churn is an inevitable part of running a brokerage. However, minimising it as much as possible can have undeniable positive effects on profits.  By investing in helping traders gain confidence so that they re-deposit brokers may expect a  higher but sustained income. Similarly, the more experienced your brokers become, the more likely they are to make bigger trades. In fact, by offering them robust educational materials, you demonstrate that you care about your clients’ long-term success. You are empowering traders to take charge of their trading journey. This helps build brand loyalty, which in turn will reduce churn.

What You Can Offer

However, none of the above-mentioned goals come easily. The content and tools needed to achieve these goals often comes at a hefty cost and take significant time resources to develop. 

Autochartist helps retail brokers reduce the costs and investment needed to produce content and tools. Our products are all designed to help traders build strategies and make informed trading decisions, all with the brokers best interest in mind. Some of our products designed to increase retention, re-activation, and even acquisition include:

  1. The Autochartist Risk Calculator: This risk calculator provides traders with risk-adjusted exposure to help them better manage their risk.  
  2. Volatility Predictions: This is an educational product, giving traders access to information regarding the volatility of their given assets on the 15-minute, hourly and day of the week levels. Traders can use this to decide when is best to trade and can be a great selling point for your sales and marketing staff.

High Impact News Events: We offer several products which alert traders to upcoming big news events. These include a calendar as well as content showing how news events may impact relevant charts. 

An educated and empowered trader can be an asset to your brokerage. By investing in risk management and educational tools, you make your clients feel valued while still maintaining, if not growing your profit margins. While no strategy can guarantee 100% success, when traders feel you care about them, they are more likely to stick to your brokerage driving your business.

Have we convinced you? Want to hear more? Contact us to learn more about our tools and how they can help you with client retention.

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