Main difficulties a user can experience when working with marketplaces

Investment marketplace is a platform which takes on a role of an intermediary between buyers and suppliers of various financial services and products. Here you can find diverse financial tools: stocks, obligations, shares of Unit Investment Trusts, investment portfolios, strategies, ready-to-use solutions, and other services of brokers and management companies. In accordance with the opinions of Internet users, the most popular investment marketplaces are Interactive Brokers Investors’ Marketplace, Fintastico и Dutch Rate. Though there are a lot of virtues of the mentioned platforms, investors can face difficulties when using them. Both buyers of financial services and their providers can experience these challenges. In this article we are going to consider the main difficulties with marketplaces which brokers and investors may experience and also we do our best to find ways to resolve those problems.

Cons of investment marketplaces for brokers

Management companies and brokers start cooperating with marketplaces because of a wide customer database of the platform. In such a way they try to boost their sales. But not always this solution is profitable because there are cons in addition to substantial advantages of such platforms. Here are some of them:
● Fierce competition. As far as a marketplace is a platform with a huge number of similar offers coming from various brokers and management companies, competition between them is unavoidable. This makes them compete with each other all the time to attract more customers, and that has not a good effect for an organization’s development.
● Disadvantageousness. When competition is intense, brokers try to increase demand for their services by applying various methods. First of all, this is a reduction of prices for their products and services in order to make a more beneficial proposal for customers. Such tactics can be not of economic benefit to them and sometimes they even make bankrupt.
● Commission. The service provider is supposed to pay a commission fee for his product or service purchased by a customer. The value depends on size of a marketplace, type of a product and other factors and can amount to 50 % of the price. Besides, every month a broker pays a fee for using such a platform. 
● There are no growth prospects. The sales volume on the platform depends on the popularity of the providers’ products with users of a marketplace. The providers cannot impact this process and as a result there is no opportunity to attract new customers through their own effort. As far as there is no direct communication between a seller and a buyer, an investor buys a product in the wrong belief that he interacts directly with the marketplace. With that said, he does not remember the name of the provider of financial tools he has bought. And next time he will trade inspired by a current market size and price rather than using his own positive experience.
● Dependence on a platform. When cooperating with marketplaces, a broker has to comply with the specified terms which may be changed in the platform’s sole discretion at any moment. The information about such changes as an increase of fees, extra charges, new terms can be delivered to the provider several days before, and he has no right to refuse. If a broker does not agree with the new cooperation conditions, he can break a contract with the marketplace but he cannot make the terms to be more satisfying.

Cons of investment marketplaces for investors

The investors, just like brokers, can face challenges when they trade in marketplaces. Most often, beginners who are not skilled in investing and have little experience in this activity, have various difficulties. But experienced investors also can come up against quite significant cons when they use a platform. Let’s consider some of them:
● A wide choice. This is definitely an advantage for experienced investors. But beginners will find it complicated to decide what should be chosen. Lack of experience and particular knowledge in investing will prevent them from choosing the right financial tool (for instance, cheaper one compared with the others). That will result in decrease of their return and sometimes they can put their funds at material risks. 
● There are no consultations. This moment is also not good for an entry-level investor who needs some help from experienced specialists. The brokers and management companies may provide investment management services, which help even beginners to get high returns. But the marketplace does not render consulting services. This is just a show-window with a wide choice of financial tools. Only trading bots can provide some recommendations predicting a profitable product but we cannot rely on their competency and efficiency of such advice. 
● Possible risks. As far as only an investor bears responsibility for purchased financial tools and further decisions, beginners are not protected against a great risk. If they decide on a wrong financial product, they risk losing all their funds.
● Extra commission. This item can be different depending on a marketplace. Some platforms charge a user fee which is paid by providers of financial products. But sometimes the brokerage service available on the platform is much more expensive than when you cooperate with the same broker directly.
● Fraud risk. All financial products and services provided on such a platform are always reviewed and checked out by specialists of the marketplace. But if an investor is involved in trading on a fraud marketplace, he takes the risk of capital losses. In order to avoid it, you should find out whether this marketplace is registered with a proper regulator. In addition to a name of the platform, you should check its site address, as fakers usually use names of true life organizations but send you to a fake website.

How can you enhance cooperation with a marketplace?

Now when you know all difficulties connected with usage of investment platforms, the question may arise: How is it possible to avoid the above-mentioned cons and use a platform capturing the full benefit? Now we do our best to answer this question.
The brokers and management companies must pay more attention to their brand: promote their own website as much as they can and forward customers of a marketplace to their page. In the case of success, an investment platform will become only another source of income and tool for customer attraction, but it will not be the only platform where they provide their financial tools. Thus, when competency grows, a provider will not have to reduce prices for his financial services. Just try to enhance your quality compared with the competitors and add some particular features which will help you to stand out of the crowd. Then, your financial tools will always be on top of search results.
When it comes to investors, the only efficient recommendation is self-education. If you are a beginner in investing, take the effort and learn all available related content including books, articles, videos. Take a training course, talk with experienced investors and follow their strategies. In such a way you’ll be able to avoid principle mistakes in investing and benefit from the platform at most.


Thus, despite of great number of substantial advantages, there are some cons of investment marketplaces. Not only beginners but rather experienced investors can face difficulties when investing on such platforms. Also, the providers of financial tools: brokers and management companies can enter difficulties. But with all drawbacks, you can arrange cooperation in such a way that the marketplace will bring the highest possible profit. The promotion and brand communications should be of great importance for brokers, while investors should advance their skills аll the time and communicate with more experienced colleagues.

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