How does the quality of signal providers affect your business?
A must-have onboarding process for brokers with investment services like PAMM, MAM, or copy trading
Since its invention, modern investment systems like PAMM and Social Trading have changed the trading industry significantly. Nowadays, any trader may register as a signals provider to share skills, knowledge, and strategy with others or become a money manager and trade on behalf of other traders. The availability of such opportunities and the lack of technological controls may cause the following problem:
Inaccurate trading signals and money managers’ mistakes inevitably lead to the loss of funds of the broker’s clients, which may result in a growing distrust of investment systems and the brand. To prevent these reputational losses, brokers need to create an efficient onboarding process, allowing them to verify the money managers and signal providers.
Here are some of the ways to evaluate the trustworthiness of the signal providers or money managers.
Checking the potential provider’s reliability may start with studying their reputation. Primarily it concerns their previous experience, including cooperation with other brokers, relations with their audience, if there is one, etc.
As a broker, ensure that the trader has not participated in scandals or lawsuits concerning his professional activities, which may affect the trading experience of potential investors and the brand’s reputation.
The next simple and effective way to study a trader’s background is to implement KYC questionnaires to ensure that the provider has basic trading knowledge and experience. Some brokers already use such questionnaires to categorize traders and differentiate trading conditions, for example, maximum available leverage.
A robust KYC policy may also help to mitigate risks during money managers and signal providers’ onboarding.
Finally, all these measures may be supplemented by introducing special requirements while registering providers. For example, asking for additional documents.
History of trading data
The prominent landmark of the quality of signals and the professionalism of the money manager is their historical trading data and statistics. The original functionality of the trading platform often can’t comprehensively cover these requests, so brokers may have to use additional software.
This functionality may be used in two ways. Firstly, it allows easy sharing of clear trading statistics with the clientele on the brokers website. Secondly, with the information received, brokers may monitor the trading results of signal providers and money managers to analyze their previous performances.
Another effective way to ensure the providers’ reliability is to pay attention to their commitment. For example, a broker may introduce a requirement for money managers – to keep a percentage of their funds on a managed PAMM account. Such a requirement may ensure a more responsible approach to managing investors’ funds and may instill trust in potential investors.
The introduction of a reliable onboarding process with the three main processes described above will also show investors the responsible approach of the brokers’ brand and demonstrate compliance with key corporate values at every stage of work.
Regardless of the technological tools that a broker uses to improve the quality of trading signals, an important factor is maintaining a balance between demonstrating the security and privacy of their investment systems and controlling the quality of trading signals within the company. These two processes can only lead to a qualitative shift in the attitude among traders towards specific companies and investment systems as a phenomenon and the trading industry in general.