Considerations When Starting Your Own Broker Firm

Juliet D'cruz

Updated on:

Trading and investing are both rewarding and fulfilling. From a financial standpoint, the market offers plenty of opportunities to grow wealth, and there’s no shortage of professional networking opportunities when it comes to working alongside other financial-minded professionals. For some, the idea of working for a brokerage is an exciting prospect, but for others, the entrepreneurial spirit leads them to stake a claim and start brokerage firms of their own.

Like with any business venture, starting your own brokerage firm comes with its own risks and rewards. The good news is that modern technology, including things like hosted trader voice services and turret as a service solutions, can make the leap into the world of brokerage ownership easier than ever. In fact, you can now source trading turrets from Market Communications in order to have access to tools that were previously only reserved for big-name firms. Market Communications also provides cloud-hosted trader voice solutions and hosted trader platform options to assist broker entrepreneurs get up and running quickly.

Consider Your Startup Expenses

Since most people who start their own broker firms are focused on finance to begin with, thinking about startup costs is likely going to be one of the top priorities during business planning. Broker firms have many of the same administrative costs that come along with starting any type of business, but they will also face a number of registration costs. For example, Financial Industry Regulatory Authority (FINRA) registration, state financial regulatory registrations and more can all be considered startup expenses for brokers striking out on their own.

Placing deposits with clearing firms is another consideration. These funds are to ensure that payments are transferred without delay when stock is bought and sold. Clearing firms not only provide an efficient way to ensure every dollar gets where it needs to go, but they also provide protection for broker firms to avoid legal trouble. Deposits are to ensure that transfers are covered, and in many cases, these are required in order to operate a broker firm.

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Be Prepared To File Documents

When starting any type of business, you’re likely going to be up to your neck in paperwork from the start. Whether you’re reviewing reports or looking over applications for employment, there’s never a shortage of documents floating around the workplace. When starting a brokerage, the amount of paperwork required to get off the ground can be even more daunting. As stated, registration with FINRA and regulatory agencies is required for most brokerages.

These entities will require a lot of forms to be filled out and filed upfront, but you may also find that you face an ongoing need to file paperwork each month or each year. This will depend on the volume of business you conduct, the types of transactions you complete, and the amount of capital you transfer. This is why planning ahead is the key to success. Having time blocked out to deal with paperwork or having a team dedicated to handling the filing and tracking of documents can be helpful in reducing downtime.

Working With The Securities And Exchange Commission

Another challenge you may face when starting your own broker firm is working with the Securities and Exchange Commission (SEC) to become licensed. In order to become licensed to provide broker services, you will need to provide a lot of information about yourself, your experience, your associates and your business. Experience counts when filing for SEC licensure, and in most cases, you will need to have personal experience working as a broker. Additionally, your business partners will fall under scrutiny as well, so keep this in mind when choosing who you plan to work with to get your broker firm started.

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