Train your traders or lose your clients

Retail traders now have a wider array of reli­able train­ing options avail­able to them, with plat­forms invest­ing heav­i­ly in an attempt to bol­ster cus­tomer loy­al­ty.

2019 her­ald­ed a new dawn for retail trad­ing with the UK’s Finan­cial Con­duct Author­i­ty intro­duc­ing sev­er­al new rules gov­ern­ing what providers can offer to the man in the street.

There were new restric­tions on the sale, mar­ket­ing and dis­tri­b­u­tion of con­tracts for dif­fer­ence (CFDs) and CFD-like options. These includ­ed lim­its on lever­age, a ban on finan­cial incen­tives to encour­age trad­ing and an oblig­a­tion on providers to close out cus­tomer posi­tions when funds fell to 50 per cent of the mar­gin required to main­tain open posi­tions. The FCA also banned the sale of bina­ry options to retail clients.

“Pub­lic trust has cer­tain­ly improved in recent years, in large part due to reg­u­la­tion,” says Dáire Fer­gu­son, chief exec­u­tive at Ava­Trade, and a for­mer for­eign exchange deal­er at Bank of Ire­land and Investec.

While the ban on retail bina­ry-options trad­ing saw some small­er com­pa­nies exit the UK mar­ket, more-estab­lished providers large­ly wel­comed the FCA’s new rules.

“The impact has been that clients are made more aware of the risks in trad­ing lever­age prod­ucts,” says Andrew Edwards, chief exec­u­tive of Saxo Mar­kets UK, adding that his com­pa­ny “wel­comed this par­tic­u­lar inter­ven­tion”.

Teaching clients about real risks

The most notice­able change for retail cus­tomers was that com­pa­nies are now required to state, upfront in their adver­tis­ing, the per­cent­age of client accounts that make a loss.

For many years, it had been no secret that the burn rate at which cus­tomers lose all their mon­ey and quit trad­ing had pre­vi­ous­ly been very high in this pock­et of finan­cial ser­vices.

With the new reg­u­la­tions now requir­ing a high-pro­file dec­la­ra­tion of this fig­ure, providers have been fur­ther incen­tivised to ensure this is as low as it can be.

As the reg­u­la­tor intend­ed, there has since been an explo­sion of inno­va­tion in train­ing and assis­tance to ensure retail clients have every avail­able oppor­tu­ni­ty to enhance their trad­ing skills.

Saxo, which sees itself as a leader in risk man­age­ment, now pro­vides videos, webi­na­rs, read­ing mate­ri­als and sem­i­nars to enhance the trad­ing per­for­mance of its cus­tomers.

“Help­ing clients trade and invest bet­ter is absolute­ly fun­da­men­tal to Saxo’s strat­e­gy and over the long term actu­al­ly ben­e­fits both,” says Edwards.

“We also pro­vide a num­ber of trad­ing tools that help clients when tak­ing on risk. These include stop loss­es, trail­ing stop loss­es, our unique account shield, and real-time prof­it and loss, port­fo­lio and per­for­mance analy­sis.”

Trader training key to retaining clients

He says these ini­tia­tives have result­ed in clients mak­ing more informed deci­sions and trad­ing more sen­si­bly. Over­all, Edwards believes clients are now man­ag­ing their risk bet­ter and gen­er­at­ing bet­ter per­for­mance and longevi­ty.

Saxo isn’t alone in build­ing a suite of train­ing prod­ucts to improve the trad­ing per­for­mance of its cus­tomers. Rival XTB says improv­ing clients’ tech­ni­cal abil­i­ty is now a key part of its strat­e­gy too.

Josh Ray­mond, direc­tor of XTB, says client edu­ca­tion is the cor­ner­stone of loy­al­ty and reten­tion. He explains: “It con­tin­ues to be extreme­ly impor­tant for our clients. That’s why XTB invests con­sid­er­able amounts of mon­ey every year in pro­vid­ing a vari­ety of resources.”

XTB cur­rent­ly offers video cours­es, which are designed by inde­pen­dent, pro­fes­sion­al traders with no affil­i­a­tion to the busi­ness, to help traders build their capa­bil­i­ties. It has worked with well-known names in the world of trad­ing such as Lex van Dam, Kathy Lien and Ashraf Lai­di, among oth­ers.

Recent months have seen the com­pa­ny con­tin­ue with its online trad­ing mas­ter class­es to recov­er fig­ures as traders looked to get an edge, as the volatil­i­ty from the coro­n­avirus pan­dem­ic rip­pled through mar­kets. Offered on the XTB plat­form and through its YouTube chan­nel, XTB’s cus­tomer train­ing pro­gramme has includ­ed sub­jects rang­ing from tech­ni­cal and fun­da­men­tal analy­sis to trad­ing psy­cholo­gies.

“It’s like Net­flix for traders,” says Ray­mond. “If you don’t like a trad­er, you can choose anoth­er. And we have these in dif­fer­ent lan­guages as well.”

The rise of online forums

The com­pa­ny has pre­vi­ous­ly offered in-office sem­i­nars as part of its edu­ca­tion­al pro­gramme, but the COVID-19 out­break saw these trad­ing clubs moved to an online forum.

The explo­sion of online forums and video sup­port mate­ri­als has been notable in recent years, but the pan­dem­ic saw provider efforts increase still fur­ther. Anoth­er provider to have invest­ed con­sid­er­able resources in such deliv­ery meth­ods is CMC Mar­kets.

Chris South, CMC Mar­kets’ head of client man­age­ment, believes such tools are embraced by new clients and expe­ri­enced traders alike. “We pro­vide a wide range of edu­ca­tion­al mate­ri­als cater­ing for both clients new to trad­ing and expe­ri­enced clients look­ing to con­tin­ue their devel­op­ment,” he says.

“Our web­site and YouTube chan­nel hous­es videos from plat­form intros to tech­ni­cal analy­sis tech­niques, while our expe­ri­enced in-house mar­ket ana­lysts pro­vide a con­stant flow of news and analy­sis, as well as host­ing reg­u­lar webi­na­rs around key events, such as the US non-farm pay­rolls.” Like XTB and Saxo, CMC Mar­kets is keen that its edu­ca­tion tools are not lim­it­ed to only the oper­a­tional func­tions of its own plat­form.

Teaching clients about real risks

Trader training key to retaining clients

The rise of online forums