2021 was an excellent year for online brokers with the Bitcoin Boom and record results on the stock markets. The headline-grabbing cryptocurrency peaked at a high of $68,769, and the S&P 500 gained 26.9% over the year – achieving an astonishing 70 record highs!
2022 is already presenting a very different financial landscape. Inflation is a significant concern, and the stock market is unpredictable. This could be great news for online brokers, hoping to see a surge in public interest in online trading. Broker affiliate partners who understand investor sentiment and follow market news could earn exceptionally high commissions in 2022.
Earn High Commissions as a Broker Affiliate
The world of online trading generates massive commissions for broker affiliates. Profits aren’t just limited to currency traders. Top-quality brokers like AvaTrade are also keen to sign up crypto traders, stock and commodities traders, as well as clients who want to trade ETFs, bonds and other significant assets. Partner programs are paying high commissions for new referrals.
There are tremendous opportunities to cash in and earn a significant income as a broker affiliate. The first step towards a potential six-figure income is to choose a regulated broker. Your choice of broker is the single most crucial decision that you’ll make as an affiliate. Promoting a regulated broker can generate a high passive income on a long term basis. If you promote an unregulated broker, you’ll make less money – and could easily get ripped off!
Read on to learn more about how broker regulation works. We’ll discuss trader expectations, regulation’s legal protections, and why it pays for affiliates to choose a regulated affiliate broker. We’ll also look at some of the major regulatory bodies in each jurisdiction.
Investors and Traders View
When one is starting to invest in the stock market, one of the most important decisions is to choose a suitable online broker. An online broker is an intermediary company that will oversee the execution of the purchase and sale operations that we request and in which we will have to deposit the money for trading.
This industry has changed!
Not many years ago, the world of the stock market was limited to far fewer participants, and practically only wholesale clients and large financial institutions were involved. With the advancement of new technologies, many more participants, retail investors have been able to access this market. With these circumstances, the number of brokers that offered their services has grown exponentially in recent years, and tough competition emerged, fighting over every investor. A war of bonuses and welcome promotions has been opened in order to attract investors’ money, and in the midst of it all, it was increasingly difficult to differentiate the offers of reliable brokers from scam ones.
Is the broker regulated and under which regulatory bodies?
Not all brokers need to be regulated in order to offer their services. Everything will depend on in which country the broker’s headquarters are located and in which countries it may or may not operate. In this sense, for example, the investor protection directives of the United States or Europe are much more rigorous and restrictive than those of other countries with softer or more tolerant regulations.
The main functions of regulatory bodies are to ensure investor protection and that their money is insured. The most restrictive directives oblige any broker to keep their clients’ deposits in segregated accounts, totally independent from those of the company itself. Therefore, investors’ money is considered client capital and cannot be affected by the financial situation of the broker or seized in the event of bankruptcy by any of its creditors. Additionally, they also require brokers to have a certain degree of liquidity to cover their operations.
In the case of an unregulated broker, it is not necessarily a scam, but we must be especially cautious since we are going to place our trust and our money with this broker. We need to be aware that their activity, in many cases, will not be supervised; we do not have a possible way of arbitration in case of conflicts. Even the broker’s work policies can become much less transparent.
This does not mean that because a broker is automatically regulated it is trustworthy and that people’s money is absolutely insured, but at least it has taken the trouble to comply with certain regulations (which will be more or less rigorous according to each regulatory body) and that in case of any incident we or our referrals, and clients we referred, can go to the arbitration channel of the regulatory body.
Regardless of the regulation, it is always necessary to assess the trust that the broker gives us. We can use the information it provides us about its location, make sure its policies are transparent, if it has good customer service or not, and finally, hear what other users are thinking.
What are the main broker regulatory bodies?
To identify if a broker is authorized and regulated by a specific body, we can go to the public registers that we will generally find on the website of each body. The main regulatory bodies worldwide are the following:
- The Central Bank of Ireland (CBI)
The Central Bank of Ireland’s Registers contains individual registers for all financial service providers and collective investment schemes (CIS) regulated by the Central Bank of Ireland.
- The Financial Sector Conduct Authority (FSCA)
The FSCA is responsible for market conduct regulation and supervision. FSCA aims to enhance and support the efficiency and integrity of financial markets and to protect financial customers by promoting their fair treatment by financial institutions, as well as providing customers with financial education. The FSCA will further assist in maintaining financial stability.
- Financial Conduct Authority (FCA)
It is the most important regulatory authority in the United Kingdom and one of the most demanding in the world. It was created in 2013 as the successor to the activity of the Financial Services Authority (FSA) and currently supervises more than 50,000 companies. Regulates all aspects related to the commercialization of financial products and ensures transparency and investor protection. It has the authority to temporarily or permanently ban any financial product that it deems abusive or misleading.
- German Federal Financial Supervisory Authority (BaFIN)
It is the German institution that is in charge of supervising financial institutions and ensuring the protection of investors and the stability of the German financial system. It was founded in 2002 as a result of the merger of 3 supervisory agencies and today it is the body that regulates some 2,700 banks, 800 financial institutions and more than 700 companies.
- Cyprus Securities and Exchange Commission (CySEC)
Despite Cyprus being a small state, there are many online brokers and financial entities that have their headquarters in this country. Cyprus is considered a tax haven due to the important tax advantages that its legislation offers, but the great advantage it represents for brokers compared to other tax havens is that Cyprus has been a member of the European Union since 2004 and therefore is integrated into the European regulation MiFID (Directive on Markets in Financial Instruments) that gives access to operate in European markets to companies established in that country.
Why partner with AvaTrade?
AvaTrade has regulatory licenses across five continents and offices worldwide. It is compliant with the rules of regulatory bodies in Canada, Ireland, Japan, Australia, Abu Dhabi, and the British Virgin Islands. Moreover, AvaTrade is accredited by the FCSA in the UK – which operates a best practice Codes of Compliance designed to ensure that its Accredited Members provide services, advice and employment to the highest level of professional and ethical standards in the UK.
What’s the difference between regulated brokers and registered brokers?
Pretty much all online brokers understand the value of official regulation. A regulated broker is supervised by an official regulatory authority like the FCA, CySEC or the FSCA. The brokerage meets the regulator’s exacting standards and complies with its rules and directives. Traders have a high level of protection and recourse to the regulator if there is a dispute with the broker. Unregulated brokers often present themselves as ‘registered brokers’ in an attempt to fool clients. All that registered actually means is that the company that owns the brokerage is a registered company. Clients have no regulatory protection whatsoever.
Are regulated brokers financially secure and reliable?
No brokerage (or other business) is 100% financially secure. Under extreme conditions, any financial institution could theoretically fail. The advantage of regulated brokers is that they are subject to a high degree of expert oversight and supervision. Regulated brokers have to demonstrate adequate liquidity, maintain segregated client accounts and usually participate in investor compensation schemes. Generally speaking, if you choose to promote a regulated affiliate broker, you can assume that the business is sound. Its partner program can pay out high affiliate commissions on a long term basis.
What if I choose a non-regulated affiliate broker?
Newcomers to the world of broker affiliate marketing are sometimes tempted to choose non-regulated brokers. They either don’t understand the concept of broker regulation, or are swayed by (apparently) high CPA commissions. If you do choose a non-regulated broker, three things are likely to happen: 1. You will not earn a high income as an affiliate. Non-regulated brokers seldom retain high value traders. 2. You will get ripped off by the partner program. They usually exploit obscure clauses in your contract to change your commission plan. They may also cheat on your payments. 3. Your own branding as an online affiliate will suffer when you promote non-regulated brokers. They are not businesses that you want to be associated with on any level. If you want to earn high commissions as an affiliate, sign up with a regulated affiliate broker.