What an honor! I was asked by Finance Magnates to be a guest blogger and thought it could be a good opportunity to share with you my (twisted?) thoughts on retention in an informal way.
Over the past 6 years I had the chance to work with many online brokers as a provider and perhaps my angle and insights could be of value. I will probably say things you already know but perhaps it will bring them to your awareness and make you reflect on them. I am sure this is worth something.
I would like to raise the issue of morality in retaining clients and how it relates to brand name. Given the work I do – Retention Automation technology – my main interest is how brokers actually retain clients (call me crazy but I am fascinated by traders’ behavior patterns) and whether we are doing something wrong in helping brokers do so.
I know this is a hot potato but stay with me.
Many claim that the trading industry’s business model is wrong because clients lose their money. Does it make all of us – brokers and providers exist in the grey area?
The capitalistic world is driven by consumption. Businesses are trying to make a living. People are trying to sell products and become wealthy or rich. I bought an expensive laptop that lasted for many years and was really happy with it. On the other side, last year, a phishing company took $500 from me for so-called accommodation to the IFXEXPO in Cyprus. It was a scam.
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People call me up to sell me stuff I don’t need (and sometimes succeed – I bought insurance for electronic devices for $200 a year. Complete waste of money). The waitress in the restaurant pushes the sweets menu and asks if we want to buy a $10 piece of cake… Businesses try to earn and reduce costs all the time so we all end up paying. Sometimes we get the value for our money and sometimes we don’t.
What do brokers sell? What is their product? In my opinion – “good brokers” enable their clients to win but mainly sell dreams. Some traders actually make it to make a fortune and others fail, so brokers sell excitement and adventure and a rush. Much like skiing, lottery tickets, prize draws, amusement parks and others. Sometimes people win and feel happy and sometimes they lose and they are challenged to try again and beat the market. This is what keeps this industry rolling. And the world.
Speaking to a large known international FX broker – I asked him what his policy is regarding withdrawals of funds. He said that they allow immediate withdrawals with as little hassle as possible. The reason was, he said, that he knows clients will come back again because they know they can trust their broker. Some brokers are not that nice in doing manipulations on their clients and take their money without giving them the experience (the product).
This is where regulation comes in and should have an important role in watching they keep the rules of the game. But why is there regulation if trading is “dangerous”? I think it is because governments know people have this need to trade and people will always find ways to do so. Governments cannot ban this so they regulate it to make sure people don’t get scammed.
Think Long Term
My point is that as long as brokers play fair and provide a good product to those who want to buy it (“trade and enjoy the ride”) – it is part of the capitalistic world we live in. If brokers prevent withdrawals and traders cannot get away or they are lured to make more deposits irresponsibly – this is where things become messy. It can ruin people’s lives. Same with alcohol – enjoy drinking but don’t let it take over your life (don’t look at me – I can quit whenever I want).
Let’s get back to retaining clients in our industry. Brokers naturally want to maximize the potential of their clients and there is no other way it could work. The way the world spins. Retaining clients could be done in a clean way – I had the chance of seeing how it is done in my own eyes. When a conversation with a client is professional, discussing his needs and abilities, and market events/analysis, for example, then I guess it is the right way.
When brokers have aggressive sales plans and Account Managers find themselves driving their clients over the racks than it may bring high returns for the short terms but for the long run will damage the brand’s name. If you want to last long – you need to provide a good service and brand yourself. Retention is an important aspect of it. Clients need to believe in the broker’s brand.
So my understanding is that trading could be hazardous and it’s traders’ responsibility to know their limits like with anything else in life. Brokers, like any other business, will always try to sell and it should stay that way. It is only how you chose to do it.