stockbroking success

Overcoming Stockbroking Challenges

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Sometime ago, the stock exchanges were for the brokers to take and direct them to whichever direction they desired. All access to exchanges was controlled by brokers. However, the emergence and strengthening of other players in the industry and more stringent rules and regulations has changed the world of stockbroking. While the technological advancement has brought with it many benefits including introduction of big online trading platforms such as CMC Markets which has eased the work of stockbrokers, it has heaped a lot of pressure on brokers to change the way they conduct business. However, this does not mean that stockbroking has lost its promise as one of the most profitable careers as long as you know how to combat the emerging challenges.

Onboarding and Monitoring Clients

The rules set to regulate the stock exchange industry demand that certain standards should be observed in management of risk. They include strict requirements to take necessary measures in assessment of clients to ensure their financial security before establishing a trading relationship with them. In addition, you are required to frequently monitor them in order to evaluate their financial soundness and assess risk.

One of the best ways of ensuring that you adhere to the rules set by regulatory authorities is introduction of advanced technology in your dealings with your clients. Automated onboarding and monitoring of clients should be the first thing you should think about. You should be able to capture data and keep track of the entire onboarding process. There are tools that are a great help in configuring and integrating the brokerage systems with your clients information including their special requirements.

Management of Liquidity

Most big stockbroking firms are part of larger financial organisations. They can, therefore, easily get capital and finances to protect themselves against any cash flow problems. However, few allow their larger organisations to have full information on their inflow and outflow of cash. The irony of it all is that they are charged with the responsibility of advising their clients on the necessity and time for depositing their cash. Proper processes of data management through the use of technology could easily see the conquering of this challenge.

Acceptance of Clients

Allowing a new client may be either through a formal or an informal process. Most stockbrokers have a well spelt-out strategy of determining whether a client is acceptable or not. It involves the creation of committees whose members are drawn from sales, operations and risk, account management and legal departments. Some stockbrokerage firms, on the other hand, operate informally through members picked from the senior management only.

Whether using formal or informal means, the criteria of assessment of new clients is the same. It involves a request for the client’s financial information together with sample portfolio. They then review the portfolio, the people in the management, the cash and servicing of debts as well as the strategy. Different brokerage firms have different requirements for minimum revenue earned per annum.

Acceptance of clients still need deep insight before a decision is made. One of the best solutions is establishing an understanding of the cost of keeping clients active after accepting them. Then, you will be able to determine whether they will bring any profit – and how much – to the stockbroking firm in the long term. Your client can easily raise a complaint that could hurt your firm or even result to job losses. So it is prudent to be cautious before you take the first step towards accepting them.

Bottom Line

Every kind of business has its own challenges. The stockbroking industry is fast evolving. New challenges are emerging by the day. There is the need to cut the cost of operations as well as having to cope with diminishing capital as a result of rising competition. In addition, clients are always demanding better services with higher profits.

To overcome most challenges, stockbroking firms should always think about their clients’ profitability before admitting them into the fold. Therefore, you should first come up with an assessment of the total cost of providing operation services to everyone of your clients. Thus, you will be able to determine who among them to pick or leave and at what charge.

Keep in mind that there is a need to build long-lasting trust between you and your clients. However, it should be beneficial to both sides. It’s your obligation to protect your stockbroking firm against capital risk while trying to fight off competition from your business rivals.

Dividend Beginner

A 22 year old Canadian dividend growth investor striving for early financial independence; building as many passive income streams as early as possible.
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My publishings on dividendbeginner.com references an opinion and is for information or entertainment purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice. I am not responsible for any decisions you make concerning finances, taxes, or investments. You must perform your own research and always take caution when extending capital.