When a brokerage is up and running, it can be very difficult to change direction. This is why the planning stage is so important. The systems you put in place from the outset will determine a great deal about the workflow of your staff, and even the style of traders you attract to your services. Nowhere is this more evident than in how you structure your sales strategy. As you’ll see below, it’s not just a matter of who you hire and the types of pitches you authorise them to use, there are also technological and content creation components. Below we’ll present the three main sales styles used in online brokerage and explain their strengths and weaknesses.
The Call Centre
This is the oldest and remains one of the most successful onboarding strategies. It involves long tables with rows of young, sharply dressed salespeople, all calling lists of sales leads and attempting to convince them to trade with you. The reason this approach is still so popular is that the barriers to entry are very low, and so it’s often the method of choice for young brokerage businesses.
The aim of the game here is to onboard as many new clients as possible and to get the deposits flowing in. This method is one of the cheapest and fastest ways of populating your brokerage with new traders. The downside is that there’s little to no quality control in terms of the types of clients being brought in, which means that client churn is inevitably much higher as you’re bringing in clients who’ll almost certainly blow up in a short period of time and some will never return. This is partly why there’s such a priority placed on constantly converting new leads with this approach.
The Boutique Brokerage
The second style we’ll focus on is the boutique brokerage. It’s not called boutique because of its size, it’s more about the style of address this type of online trading business employs. Boutique brokers do not rely on any high-pressure sales tactics, they don’t even like to call their sales staff by that name, instead choosing to call them client relations managers, or something similar.
The idea here is that you’re not cold calling anyone, you’re simply getting in touch with prospects who’ve already expressed an interest, either online, via phone, or email, in order to help them decide whether your services are suitable for them. This type of broker typically targets their services to higher net worth individuals than the call centres. Churn is also typically lower here because the priority is to attract wealthier, more experienced traders who will not be gone from one day to the next. This style creates a sense of professionalism and reputability, which even lower net worth retail clients are attracted to.
However, this is a much longer-term approach, it’s typically employed by experienced brokers who have already managed to gain regulation in a reputable jurisdiction (see our series on regulatory approaches here). It’s an investment in the future and one that doesn’t pay off immediately in terms of client numbers.
Robo-brokers have completely done away with human sales teams in order to focus on automating their onboarding efforts. This type of broker uses sophisticated online marketing techniques to attract clients. These involve everything from search and display advertising combined with rigorous A/B testing, to automated, trigger-based conversion funnels. Data science is the key here rather than human relationships. As such, what this type of brokerage lacks in sales staff, it more than makes up for with online marketing specialists.
In some ways, this is the hardest style of the three to get right because there’s a technological overhead that can’t be overlooked. Then, once you have those systems in place, you need knowledgeable people to run them. It also means that you’ll need to invest heavily in content creation, as this is what online marketing relies on instead of the human connection of a salesperson.
Robo-brokerages tend to target similar demographics as call centre brokers, so you’re looking at higher churn and lower average net worth than the boutiques, but the beauty of this approach is that it’s constantly able to optimise its targeting to keep the conversions coming in.
Which is Best?
As explained above, each approach has its benefits and weaknesses. Like foregoing regulation in a stricter jurisdiction, so you can move fast and loose when your business is still young, the call centre approach has its undeniable advantages.
So does the boutique approach, which focuses on building a brand name that’s synonymous with respectability and a client base of wealthy professionals.
The robo-brokerage is a relatively new addition, but it’s definitely on the right side of history. Even call centre and boutique brokers are forced to use elements of the robo-approach in their own marketing, it’s just that robo-brokers have opted to take this to the next level and automate everything.
From our perspective at Panda, we’re completely agnostic to the type of approach our clients choose to run with. As a technology company, we’re more than equipped to provide the types of systems required to operate a robo-brokerage, but we also have substantial experience in running call centres and complying with the strictest regulatory guidelines.
No matter which way you choose to go, we can help, so please get in touch with one of our success managers for a consultation.
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