Single-asset or multi-asset: what is best for your brokerage?
Author: Baiana Kashaeva
The last couple of years have been traumatic to many sectors of the economy and for individual households, which has forced traders to look for new ways to offset their risks. One of the results of those shifts was the vast adoption of multi-asset trading strategies.
Trading across multiple asset classes generally means a better chance of surviving the high volatility period without experiencing substantial loss. Some assets (e.g., crypto) are naturally more volatile than others, so traders can pick the level of risk that is comfortable for them.
As brokers operate in a highly competitive environment, naturally, they are constantly looking for ways to provide better service and attract more clients. And one of the latest ways to stay competitive is to convert to a multi-asset brokerage.
Benefits for traders (and, therefore, brokers)
Let’s go through the main benefits of going multi-asset for traders, which inevitably results in more success for brokers.
A wider range of investment opportunities
If traders only focus on a single asset class, for example, Forex, they risk missing the opportunities that other classes can offer. If traders can stay with their preferred broker and have access to several asset classes, they have a much better chance of making profits without the overhead of having to look for new brokers, setting up accounts, and adjusting to new systems. As it is rare for all markets to trade flat simultaneously, there is a higher chance for traders to find alternative assets to work with while their preferred market is not looking promising.
Diversification: combining tactics and risk strategies
Everyone knows that you are not supposed to put all your eggs in one basket. So it only makes sense for traders to diversify their portfolio in hopes of making more revenue and reducing their financial risks at the same time.
Different asset classes perform better at different times, as well as represent different risk levels. Traders can choose to be more aggressive with certain parts of their portfolio and play it safe with the rest.
Additionally, as the last couple of years have demonstrated, long-term preservation of capital in a highly volatile environment proves to be a challenge. As a result, traders are more inclined to enter the markets and asset classes which will help save rather than multiply their capital.
Multi-asset brokerage. Is it the right way for me?
Today we have talked a lot about the benefits of a multi-asset approach for traders and brokers. However, if you are currently a single-asset broker, it does not mean that you automatically have to expand and upgrade to fit in with the trends.
Before you go ahead and change your business model, ask yourself:
- Do I want to change my current way of conducting business?
- How much time and resources am I realistically willing to invest in the project?
- What assets does my current technology partner support? Is it only FX and CFD?
- Will my tech partner have the resources to add new assets, e.g., Weekend FX, crypto spot, futures, or equities?
- How much time is integration with new LPs going to take?
- How much time will compliance with the new LP take?
- Who will be responsible for managing integration and communication with LPs and exchanges?
Tools for Brokers is a technology provider, but on top of that, we offer consultation with clients and assistance with new projects. Clients value our flexibility and open mindedness, as they know they can count on us. We will not only assist with a new project but also advise where to start, what resources are required, and whether it is actually going to be worth it.
Please feel free to email us at email@example.com if you have any questions about our services and how we can help you bring your brokerage to the next level.
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