Money Reimagined
Gulf News' podcast series in association with Rostro Group, Money Reimagined unpacks the future of finance, innovation, and opportunity through the lens of a new generation of investors.
Money Reimagined
How partners make money
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In this episode, the focus shifts from investing to the business side of finance, as John Murphy, Chief Commercial Officer at Rostro Group, explains how people with knowledge and networks can build income through the Introducing Broker (IB) model.
Fast onboarding, you want transparent pricing, execution is extremely important. From an IB perspective, you want solid reporting on your side, you want to have visibility on your client's activity. We put a lot of resource into what we call the IB portal. Sort of local trust and market understanding kind of beats the global brand, to be honest with you. And that's the advantage that an IB has. Knowledge builds trust first. Many sort of IBs they start with education and they use that to build a community. It's more so how we can support an individual that has market knowledge and go from like a one-to-one model to a one-to-many.
SPEAKER_01Hello and welcome back to Money Reimagined, Investing for the Next Generation. The podcast where we explore how the next generation is reshaping finance, technology, and investing. I'm Lochland Kitchen, and today the discussion focuses on how partners make money. In this episode, the focus shifts from investing to entrepreneurship, specifically the introducing broker or IB model. This pathway allows individuals to turn market knowledge, their relationships, and local insight into a real scalable business. It's going to be fascinating. And joining me today to talk further is John Murphy, the Chief Commercial Officer at Rostro Group. Now, based in Dubai, John is actively involved in shaping international growth strategies within the group, and particularly for Rostro's retail brokerage arm called Scope Markets. And it's great to have him on another episode of the podcast. John, thank you very much for coming in.
SPEAKER_00Thank you very much for helping me.
SPEAKER_01If we can go back to the beginning, always the best place to start. For people who are new to investing, they're new to the industry, they might be unfamiliar with the term, this introducing broker. What do they actually do and how does this become a viable business?
SPEAKER_00Yeah, so that ultimately an introducing broker or IB is the bridge that connects the underlying clients to the brokerage. There's a range of different types in terms of what service they offer their customers, but ultimately they educate, uh, retain and service that client base. And normally they're on a commission-based scheme which compounds over time. So as they are acquiring more customers, you know, that kind of income generates for them by representing the company, looking after their customers. Um, and for us, that's the ratio we have between them and us.
SPEAKER_01So if someone's new to the company or new to the industry and they get placed within introducing broker, they shouldn't look upon that as being a bad thing. That's quite a good idea because they're there to help really educate you about how the process works.
SPEAKER_00Yeah, exactly. And and also you have you kind of have that extra level of service. You know, obviously many, many brokers have, you know, tens of thousands, if not millions, of active clients, right? So you kind of get more of a high touch service from your introducing broker. Um, and there's normally a reason behind that as well, right? Because it may be, you know, as I said, education is very popular, um, especially for you know young, the younger generation that are, you know, looking at, you know, investing or you know, starting to trade. So by having that, you know, IB, um, it kind of gives them that extra layer and that more sort of hand holding, especially if they're early in their kind of investing journey.
SPEAKER_01So if you're looking to be an introducing broker, many IBs do start with immense amounts of market knowledge rather than perhaps a traditional business background that haven't come from being a CFO or something.
SPEAKER_00Yeah.
SPEAKER_01So how can that expertise, I guess, of that market knowledge be turned into scalable income?
SPEAKER_00I I think like sort of supports building trust and specifically that local market knowledge as well, right? Because you know, across the globe and specifically in the emerging markets, um, that's really considered highly by an IB or you know, a partner that really understands like the local clientele and then also simply aligns you know that underlying client with the brokerage that best meets their needs ultimately, because there's a you know huge amount and range of choice, you know, out there. And uh by having that IB is gonna you know help in terms of directing you know to the right broker that that works for them.
SPEAKER_01And I guess that's the thing is about that relationship. Yeah, keeping that relationship with your with your broker. Um, a big part of being an IB or the IB model, I should say, is all about relationships. You do get a lot of people that come in with uh immense amounts of uh market knowledge. But um, for someone who's keen on being an IB, how are those strong client networks? I mean, we hear at every conference we've been to, your network is your net worth and all these terminologies. How are strong client networks built and how are they kind of managed over time?
SPEAKER_00So, yeah, I mean, I think certainly now like social media is hugely present, right? Like in in all industries, but specifically for the trading world, which hasn't traditionally been the case. Yeah, so that certainly um supports IBs in growing that network, but in terms of retaining it, it's more you know, building trust. And I think trust beats marketing, right? And on the majority of the time. So, yeah, that's what we see from our our our side. So the IBs that are specifically and very successful, uh, it's normally because you know they have that trusted relationship with the broker itself, you know, they you know have that uh level of uh transparency around the pricing, the economics of of the agreements itself, but also can then so sort of use that to service their clients as well, right? Um, and yeah, I think that's what we are we are seeing, and it compounds because you know, very much a referral business, and you know, we have some introducing brokers that have a sort of another layer to them, which is like a sub-IB network. Really, it can sort of go down even to about three or four layers. Um, and that's how you know these networks are expanding to tens of thousands of customers.
SPEAKER_01Yeah, so you're seeing it a lot. I mean, you saw it maybe about 10 years ago with real estate agents. Um the idea of it wasn't so much about um the products or the inventory that they were selling, it was about look at me, I'm a real estate agent, you can trust me. Yeah. And is that what's being evolved with IBs? The idea of putting yourself out there, and there's that idea that if people see you enough and they feel they get to know you, there's a level of trust or um you know, a relationship that's already been formed to work on.
SPEAKER_00Yeah, definitely. Yeah, it's very, very much aligned actually, as a good example. Yeah, I think as well as that over time, like that that relationship really comes through between the IB and the broker, where you know, some IBs will work with multiple, some will be you know exclusive. And if they are, they're ultimately representing the company, right? It's like having a um an agency or a sales office in a certain location that is representing us, you know, from a brokerage perspective. And yeah, by having that kind of, I mean, they have the ability to be completely flexible, right? So, you know, they don't report, you know, they, you know, they can kind of benefit from that sort of self-employment model, if you like, um, knowing that clients are coming, know that clients are active, you know, they're generating income. And then it's just where they're going to be putting their minds in retaining that, you know, retaining that client base and then you know, simply focusing on growing it.
SPEAKER_01If you can share some, I guess some great examples or real-world examples about IBs, what is actually their business model as in how do they generate their income? And what types of clients are they working with? I mean, are that are they coming in with um young people that are starting the workforce that are looking to make their first investments? Is it maybe mum and dads that have got a nest egg and they're looking to find a different way to diversify? What are those examples of generating income and and how do you think that then grows as the businesses mature?
SPEAKER_00Yeah, I mean, the best example for that I think would be like an educational company. Like there's a lot of, I think influencers is how they're described now, but you know, they are, you know, ultimately improving financial literacy, right? And trading is only one part of that. Yeah. Um, but they will have a service and it may be an educational program and it might introduce them to various different investment products, various different trading products, and they'll have agreements with you know brokers who they refer and that they trust can ultimately look after their clients. So I think there's, you know, without going sort of uber specific, but even in this space in in in Dubai where we are, there's educational companies that have probably got over 10,000 clients and they've built that up. And from an income perspective, they are probably, you know, charging for the course itself. Okay, so to go through that. And at the same time, as their clients are becoming active and they're becoming more confident, they're generating sort of volume-based commission as well, which again, like as that client base grows, that's compounding. And yeah, as their clients are active, you know, they're they're generating income.
SPEAKER_01And that's what you were saying about the snowbowling effect. Exactly. Yeah, getting those clients and uh the compounding investments. Um, for someone who's looking to be an IB, and given your experience, John, what are some of the support structures in terms of tools or platforms? Uh, what do you think is the biggest difference that help IBs kind of scale effectively?
SPEAKER_00Yes, it's a good question. I think, you know, most importantly, or one of the most important things is that you know, you go with a broker that is truly multi-asset because you know, the market trends, right? You know, we've seen a lot of traction on gold recently, especially and and you know, the last sort of 18 months to two years, too. Yeah. Within that time, you know, Bitcoin and you know other cryptocurrencies have emerged, and you know, there's been a lot of traction behind that too. And then you still get demand for you know the more traditional assets, right? So ETFs, um, you know, indices, oil, you know, it's it's still moving. And whilst there is still um you know volatility in these products, there's still going to be demand. So you kind of don't want to go to a broker that's you know solely going to be focused and really strong at one asset class, um, because you know that trend will go move on, and then you'll kind of get left behind because now you know people are talking about something else, right? So I think that's quite important. And then it's you know, the kind of basics for a broker, right? It's you know, fast onboarding, you know, you want transparent pricing, you know, execution is extremely important. Um, and then from an IB perspective, you know, you want solid reporting on your side, right? Like you want to have visibility on your client's activity. And you know, we put a lot of resource into what we call is our IB portal, which enables, you know, an IB or a partner to understand exactly, you know, what part of the funnel stage their clients are, you know, what their activity is, you know, what clients are ultimately trading. Um, and that helps them build rapport with the underlying client base, but obviously gives the visibility that they need as well.
SPEAKER_01Yeah, and isn't that fascinating? Because that early financial advice you always hear is the importance of uh diversification with your own investments. Um, but it's actually the case for IBs, they need to be as equally diversified when it comes to you know different products in different markets.
SPEAKER_00Yeah, completely.
SPEAKER_01Looking at the uh the strong demand, there seems to be a really strong demand for financial access in a lot of the underserved markets. Why do you think IBs, or you know, as we were saying, introducing brokers, why are they often best positioned to sort of meet that demand?
SPEAKER_00Uh, I think sort of local trust and market understanding kind of beats the global brand, to be honest with you. And that's the advantage that an IB has. Like you rarely get IBs that are completely global and vast, right? You normally find and why you know brokers have relationships with IBs is because you get access to that local market knowledge. And that's around sort of you know, payments, around sort of you know, KYC needs, around what's you know, specifically popular to trade in that field too. So I think that's you know, certainly um, you know, an area where IBs are extremely useful, and that's how they ultimately build their brand and build their network.
SPEAKER_01Yeah. For people who are looking to take on being sort of uh IBs, is there anything that you find common about an introducing broker about sort of age or their experience or their financial experience that makes someone a great IB?
SPEAKER_00Uh yeah, I I think being sort of really on top of like the what we call like hot products, like hot stocks, you know, cryptocurrency, as I've mentioned as well. Um, someone who can, you know, really understand that quickly has a massive advantage. And yeah, no, crypto is a is a fine example, right? You know, beforehand, and you know, 10 years ago, you know, it was FX, indices, and oil, right? That was ultimately what the CFD space was. Um, so those that were able to get in, you know, relatively quickly, understand like the concept of cryptocurrency, how it works, how clients can ultimately, you know, buy, hold, or, or trade on sort of daily moves, you see them really come through. And it's especially more so for, you know, the younger individuals, right? So those that are starting out, have an interest in the financial markets, need some guidance, need to understand the broker they want to work with that's going to give them the access that they need. And that's where an IB I think is really useful, and that's where ultimately clients you know benefit from the most.
SPEAKER_01You mentioned about transparency, particularly when it came down to things like just you know fees and commission structions and so forth. From from your experience, what separates a partner-first, transparent platform from I guess a platform that simply offers commissions?
SPEAKER_00Yeah, I mean you you you sort of nailed it in the question transparency. Here's that transparency. Okay. So yeah, a partner-first, you know, platform, you know, always beats the commission-based one, right? Because they're interested in retaining that customer as as much as we are, uh, as the broker, right? And, you know, again, offering, you know, a diversified sort of portfolio, enabling them to, you know, have access to you know, what is sort of emerging as a as a popular or in-demand sort of instrument. Um, commission only, you probably don't have as much of a relationship. It's very much transactional. You know, it's you know, you trade, I get rebate, right?
SPEAKER_01And that's and that goes back to what you were saying about the importance of relationships. You're kind of then moving away from the importance of that feature.
SPEAKER_00Exactly right. And that's where I think as as I mentioned, you you know, the global kind of IB model, I see less of it now completely, to be honest with you. It is more IBs that are like super niche and really understand that local audience and conserve them and understand exactly what this uh ultimately the client's looking for and direct them to you know in the in the right direction for a um to which broker to trade with ultimately.
SPEAKER_01John, you were mentioning about global uh IB markets and how, well, you're not really keen on the global IB model anymore. It's more about being local knowledge. So in this region, the UAE, how is the IB model different now compared to other markets?
SPEAKER_00Um so this market specifically, um, you know, there's sort of Sharia compliant, you know, understanding you need to be aware of, which is not like a one size fits all, right? And specifically in the Middle East, as well as that, there's a lot of demand, you know, in the UAE specifically for local stocks. And yeah, the BIB may not look at that as a huge sort of revenue generator, but having the ability to have that range of assets available is a massive draw for IB. So they'll be more likely to work with a broker that can offer that because that's ultimately what clients are interested in. Um, you know, offers a different kind of aspect to you know that client's portfolio where you still get you know gold, Bitcoin, etc., all is there too. But in reality, if um again to the example around sort of financial literacy and you know understanding the client, helping them build that portfolio within the you know the financial markets, um, having sort of a range of sort of shorter term, more speculative products available as well as the longer term pieces and specifically things that are local, I think you know, really enables IBs to sort of grow that network.
SPEAKER_01When it comes to your work at Rostro and also uh scope markets and their structure support, how does your job from training, I guess, to multi-asset solutions, how does that help IBs in their career building sustainable, long-term secure businesses?
SPEAKER_00Yeah, it is really structured. I mean, we you know, we we are quite um disciplined in terms of the partners that we do work with and ensure that they have that market knowledge as well, right? Because, you know, as we mentioned, they're ultimately representing the company, right? You know, they'll be you know speaking to an underlying audience um that they have access to and and bring clients on board. So for us, like as well as you know, the IB portal and having that transparency from their perspective, there's also sort of a structured training program that comes in. So when an IB would be on boarded um and we're happy from a due diligence perspective that they're you know ultimately going to be representing us, um they'll go through, like it's it's not sort of super invasive, but about a three-day um training course, they would understand you know how clients are on board, what the onboarding process is, the payment methods that are available, um, the assets that are available to, and you know, can sort of really have that service to their clients, right? Because that's you know one of the key reasons to why a client would go via an IB as opposed to just ultimately going directly.
SPEAKER_01So you obviously have all that support, and that's a huge advantage if someone is looking for an opportunity to get involved or maybe want to become uh an IB or considering to become an IB. Um, how compelling is it right now, financially? What does the situation look like if someone's coming to you and they're looking to be an introducing broker?
SPEAKER_00Yeah, I mean, the retail trading space is still growing immensely. Um, there's still a huge amount of traction, especially the younger generations, as we've highlighted, there's you know, a lot of younger individuals that want access to financial assets, right? So that's a huge opportunity there. As well as that, like technology, like a lot of industries, is lowering the barriers to entry. Um, you know, to get an you know, when I, you know, started my career as PDF documents and you know, wet signatures to get an account, you know, they're the average time to get an account open hours sort of less than 10 minutes, right? So, you know, if you're if the marketing is well, the service is good, then you know, in a sort of still growing space, I think there's still tons of opportunity for sort of emerging IBs.
SPEAKER_01And if you are an emerging IB or they're looking to come, you know, and approach you and work with you, what are some of the things you're looking for? What makes the ideal candidate that might come across your desk?
SPEAKER_00Yeah, it's it's the the service that they're offering, right? So if it is education, I'd want to, you know, have a look at what their you know material is um and what their direction is. Because as well as that for us as well, we're not just here to sort of grow as much volume as we possibly can, right? That's that you know works for some and there's IBs that are sort of super aligned with that. You know, for us, it's ensuring that our clients are here for the next years and we can support them, you know, throughout all of the access that they would want from a financial perspective. So for us, it's ensuring that we're aligned. Um, and you know, that's where our DD comes in. And then once we're happy with you know the material that the IB is putting out, then yeah, we would, as I say, work with them so they feel that they've got the real support from us as well. Because, you know, if we see our opportunity in a market that we're interested in, well, that IB growing is good for us, right? Ultimately, because it's going to you know give us more access to more. It's increasing the pie for everyone. That's right, exactly right. And yeah, especially where you know we're a relatively new entrant to the Middle East, I think we can leverage R IBs as much as they leverage us as a broker. You know, it's a it's a very strong brand. We have, it's a very, you know, large group, and IBs will benefit from that. But at the same time, you know, for say specific countries in the Middle East where it's very local, they want local presence, they want someone, of course, speaks their languages, understands the payment methods, understands you know the KYC, you know, needs for that audience as well. That's where we kind of really get feedback from our from our introducing brokers and our partners to enable them as much as we can.
SPEAKER_01John, many introducing brokers or IBs actually start with market knowledge. They come with that rather than a traditional business background. In your experience, how can that expertise then be transformed into a career and a stable income stream?
SPEAKER_00Yeah, so knowledge builds trust first. Many sort of IBs they start with education and they use that to build a community. So it's more so how we can support an individual that has market knowledge and go from like a one-to-one model to a one-to-many. And the social platform is you know, obviously huge for that now, right? I think that's where the majority of you know growth is coming from for IBs in terms of growing their network. Um, and in addition to that, you know, tech is you know massively reducing you know the barriers to entry as well. So I think that's what uh that's where IBs are benefiting.
SPEAKER_01And just further to that point, John, you you were saying that if someone wants to come in, they've got that great market knowledge. You have the opportunity to put them in, what is it, a three-day course? Is that what you offer?
SPEAKER_00Yeah, that's right. So yeah, and IB will come in and they have that ultimate um, you know, market knowledge as we've mentioned, right? So for us, it's understanding how we can transform that market knowledge into you know, growing that as a community and moving away from sort of a one-to-one uh to a one-to-many. And obviously, social platforms are huge for that and they support IBs to do so. So when we get that in and when we get, say, the request or you know, the inquiry, um, we'll of course review and take a look at what the IB is ultimately offering. And then for us, it's also you know, using the expertise within the organization and how we can develop that IB's platform and scale. Um, specifically where it might be a you know, a certain region or a certain country that we're interested in developing ourselves, we can understand what sort of systems, what sort of tech that we can implement on that client's or that IB's platform and help them sort of grow their network.
SPEAKER_01Yeah, so it's working with their strengths to strengthen your strengths and then the relationship builds from there.
SPEAKER_00Yeah, for sure.
SPEAKER_01Um yeah, so what are the um what does the IB model offer that other traditional career paths might not be available to other people?
SPEAKER_00Yeah, so there's relatively low um capital. Yeah, low capital to start. So that's you know, certainly, you know, an advantage. Um you build like income via the asset yourself as opposed to you know hours of work. Um and it certainly teaches sort of accountability, you know, ownership, um, understanding. They all continue to develop their sort of financial understanding as well, which You know, compounds and therefore allows them to attract more clients whilst they're sort of retaining their existing base.
SPEAKER_01And do you think there's something about young entrepreneurs that are perhaps a little bit more aggressive in their thinking that the in the way that they want to invest that might attract them to becoming an IB?
SPEAKER_00Yeah, there certainly is. However, you'd actually say that that's not the way to be thinking, right? Because yeah, like there's you know a lot of you know demand for sort of quick money, which is you know often unrealistic, right? They are you know high-risk products, you know, there's leverage involved and a sense field.
SPEAKER_01Isn't that isn't that the older saying from Warren Buffett, the thing about getting rich is everyone wants it quickly, isn't something like that?
SPEAKER_00Yeah, exactly, exactly, which unfortunately is not the case. Um, but yeah, I mean I think for this it is more, you know, what why I like the IB model is that you do really, really see it scale up. Um, and especially now where you know social media is you know huge for a lot of IBs, as say the tech that's supported from the brokerage side, um, and you know, individual and and sort of you know partners, or it might be a network of partners, even, um, you know, they've got the ability to run events, run online events, um, so the access is huge. And again, it gives that flexibility for an IB to you know start, you know, just with say initial market knowledge, find a platform and build that network. And, you know, that's ultimately how income's generated for them.
SPEAKER_01Well, John, thank you very much for coming on the episode. It's been good to hear your insights and also your experience and providing such a clear view about what really takes to build an IB business. Thank you so much for coming in.
SPEAKER_00You're welcome. Thanks for having me.
SPEAKER_01And I guess what stands out to me is that it's not just about commissions. You mentioned that it's about entrepreneurship, relationships are obviously the big one, but turning market knowledge into a business, building those networks, creating long-term value for clients who are probably underserved by traditional markets and traditional finance. So thank you very much for coming in. If you would like to learn more about Rostro and how it is redefining access to global markets, you can visit the website rostro.com. And don't forget to tune in to the website golfnews.com forward slash podcasts for more insightful conversations. I'm Lachlan Kitchen. Thank you very much again for joining me on this fourth episode of Money Reimagined. Join me for the final episode in the series where we find out what it really takes to be a trader today. See you then.