Having committed traders over the long term and revenues from spreads and commissions seems to be the future
A little less than a month has passed since the introduction of the new ESMA regulatory framework for retail brokers. As we reported last week, one key aspect which brokers got mandated to disclose is the profitability of traders. While for industry insiders those numbers are not a surprise, the figures can have an adverse impact on onboarding prospective clients.
Granted, if a client is hooked on beating the market, he/she will always dream of being a part of those on average 23.7 percent. However, if we are to take a cue from the first several weeks into the new ESMA regulatory framework, market conditions are changing.
But let's refresh our table from last time:
Marketing Trends
From what we are picking up on the market and from data shared by senior execs of publicly listed companies, the average cost of acquisition of traders is spiraling higher. If we are to follow what brokers with big coffers are doing, the picture gets even clearer.
On Tuesday, eToro announced the biggest football sponsoring deal in the history of the industry. FxPro launched a new Youtube ads campaign, and CMC Markets are adopting a new approach towards marketing to clients. Overall, brokers are committing more and more resources to generating content, be that paid or organic.
All of this is happening because the next several months will be crucial for the long-term survival of brokers. Rising client acquisition costs are only one part of the equation, and the reduction in Leverage available to retail traders is yet to be felt. If scientific data is to be any clue as to what the future holds - the lifecycle of traders is about to change dramatically.
Client Lifecycle Changes
Brokers have been accustomed that the average life of a retail client is close to six months. This has pushed some to neglect the long-term impact on the business model, which ultimately attracted regulatory attention. Let’s not kid ourselves, the primary reason why we have this disclosure mandate in the industry is that regulators got worried.
Note that the figures which brokers have to report are based on the performance of their active clients over the past 12 months. As a diligent commentator on our previous post pointed out, these figures deteriorate over time. The statistical probability of a client being profitable while trading the market over a period of several years gets closer to zero with every passing year.
Brokers universally agree that the reduction in leverage to 30:1 is a step which is going to make traders last longer. It is much easier to lose your deposit at a leverage ratio of 500:1 than at 30:1, hence the changes which the ESMA considered prudent to adopt. We are not going to discuss whether these were the right changes here, what we are going to do instead is focus on what can brokers do to raise their revenues per client over time.
Education, Education, Education
We can’t stress enough that education is probably the most important aspect of gaining a valuable customer. Over long periods of time, active, profitable traders are generating a much more sustainable source of revenues for brokers. Firms which have been operating on a true-STP business model know this, and they have committed significant resources to help their clients avoid snapping into a losing streak.
If brokers are willing to improve the client profitability stats on display on their ad campaigns, a consistent and diligent approach is essential. There are several ways for the companies to approach this matter and a combination of unique strategies might be the most prudent way to beat the new marketing rules.
Tools that provide more information to traders about the market are valuable, but it is also important to use the right tools. Overwhelming clients with information has been one of the strategies used by the brokerage industry for a while. It basically works until it doesn’t, and this is cyclical. Whether you choose to provide market cues from influencers, AI or advanced algo building engines, try to keep in mind that the goal for success now is keeping a client for the long term and generating more revenues from spreads and commissions.
This last point I want to make is, of course, quite an important one. Technology has been at the core of this industry ever since it was created. Accurate quotes and execution are the way to gain client loyalty, something that over the years has become less important due to the aggressive competing strategies employed by companies with a questionable reputation.
I remember starting in this market as a trader in 2004 when the space was much tighter and opening an account was much harder - i.e., sending documents by post, translating ID’s, etc. This age is now behind us, but the default leverage at the first decent broker that I used was 20:1. Then came the ads that kept promising more and more leverage.. then came the SNB, now comes ESMA. Time to get a grasp of this new reality and play this game for the long run.
A little less than a month has passed since the introduction of the new ESMA regulatory framework for retail brokers. As we reported last week, one key aspect which brokers got mandated to disclose is the profitability of traders. While for industry insiders those numbers are not a surprise, the figures can have an adverse impact on onboarding prospective clients.
Granted, if a client is hooked on beating the market, he/she will always dream of being a part of those on average 23.7 percent. However, if we are to take a cue from the first several weeks into the new ESMA regulatory framework, market conditions are changing.
But let's refresh our table from last time:
Marketing Trends
From what we are picking up on the market and from data shared by senior execs of publicly listed companies, the average cost of acquisition of traders is spiraling higher. If we are to follow what brokers with big coffers are doing, the picture gets even clearer.
On Tuesday, eToro announced the biggest football sponsoring deal in the history of the industry. FxPro launched a new Youtube ads campaign, and CMC Markets are adopting a new approach towards marketing to clients. Overall, brokers are committing more and more resources to generating content, be that paid or organic.
All of this is happening because the next several months will be crucial for the long-term survival of brokers. Rising client acquisition costs are only one part of the equation, and the reduction in Leverage available to retail traders is yet to be felt. If scientific data is to be any clue as to what the future holds - the lifecycle of traders is about to change dramatically.
Client Lifecycle Changes
Brokers have been accustomed that the average life of a retail client is close to six months. This has pushed some to neglect the long-term impact on the business model, which ultimately attracted regulatory attention. Let’s not kid ourselves, the primary reason why we have this disclosure mandate in the industry is that regulators got worried.
Note that the figures which brokers have to report are based on the performance of their active clients over the past 12 months. As a diligent commentator on our previous post pointed out, these figures deteriorate over time. The statistical probability of a client being profitable while trading the market over a period of several years gets closer to zero with every passing year.
Brokers universally agree that the reduction in leverage to 30:1 is a step which is going to make traders last longer. It is much easier to lose your deposit at a leverage ratio of 500:1 than at 30:1, hence the changes which the ESMA considered prudent to adopt. We are not going to discuss whether these were the right changes here, what we are going to do instead is focus on what can brokers do to raise their revenues per client over time.
Education, Education, Education
We can’t stress enough that education is probably the most important aspect of gaining a valuable customer. Over long periods of time, active, profitable traders are generating a much more sustainable source of revenues for brokers. Firms which have been operating on a true-STP business model know this, and they have committed significant resources to help their clients avoid snapping into a losing streak.
If brokers are willing to improve the client profitability stats on display on their ad campaigns, a consistent and diligent approach is essential. There are several ways for the companies to approach this matter and a combination of unique strategies might be the most prudent way to beat the new marketing rules.
Tools that provide more information to traders about the market are valuable, but it is also important to use the right tools. Overwhelming clients with information has been one of the strategies used by the brokerage industry for a while. It basically works until it doesn’t, and this is cyclical. Whether you choose to provide market cues from influencers, AI or advanced algo building engines, try to keep in mind that the goal for success now is keeping a client for the long term and generating more revenues from spreads and commissions.
This last point I want to make is, of course, quite an important one. Technology has been at the core of this industry ever since it was created. Accurate quotes and execution are the way to gain client loyalty, something that over the years has become less important due to the aggressive competing strategies employed by companies with a questionable reputation.
I remember starting in this market as a trader in 2004 when the space was much tighter and opening an account was much harder - i.e., sending documents by post, translating ID’s, etc. This age is now behind us, but the default leverage at the first decent broker that I used was 20:1. Then came the ads that kept promising more and more leverage.. then came the SNB, now comes ESMA. Time to get a grasp of this new reality and play this game for the long run.
58% of UK Investors Choose Professional Guidance over 'Finfluencers’
Network, Learn, Grow | FMAS:24
Network, Learn, Grow | FMAS:24
Get ready to mark your calendars for FMAS:24, returning this May! Take a quick glimpse of what awaits at the Sandton Convention Centre in Sandton, South Africa from May 20-22, 2024.
Don't miss out on this 5-second invite packed with energy and urgency!
Secure your free ticket now 🔗 https://events.financemagnates.com/yQx0l?utm_source=youtube&utm_campaign=fmas-is-back&utm_medium=video&RefId=FMAS24+Video+Ad+%5B1%5D
#fmas24 #fmas #fmevents #financeinafrica #traders #investors #affiliates #forexTraders #investmentOpportunities #B2BNetworking #finTech #Innovations #TradingCommunity #BusinessOpportunities #AfricanBusiness #Johannesburg #southafrica
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Get ready to mark your calendars for FMAS:24, returning this May! Take a quick glimpse of what awaits at the Sandton Convention Centre in Sandton, South Africa from May 20-22, 2024.
Don't miss out on this 5-second invite packed with energy and urgency!
Secure your free ticket now 🔗 https://events.financemagnates.com/yQx0l?utm_source=youtube&utm_campaign=fmas-is-back&utm_medium=video&RefId=FMAS24+Video+Ad+%5B1%5D
#fmas24 #fmas #fmevents #financeinafrica #traders #investors #affiliates #forexTraders #investmentOpportunities #B2BNetworking #finTech #Innovations #TradingCommunity #BusinessOpportunities #AfricanBusiness #Johannesburg #southafrica
📣 Stay updated with the latest in finance and trading!
Follow FMevents across our social media platforms for news, insights, and event updates. Connect with us today:
🔗 LinkedIn: https://www.linkedin.com/showcase/financemagnates-events/
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Here's a sneak peek into the FMAS:24 vibrant atmosphere! Join us at Africa’s premium financial event for a transformative experience that combines the best of finance and technology.
From May 20-22, 2024, the Sandton Convention Centre in Sandton, South Africa, will be the hub for over 3,500 attendees to engage in unparalleled networking opportunities, learn from over 150 industry-leading speakers, and explore innovations from 120+ exhibitors.
Secure your free ticket now 🔗 https://events.financemagnates.com/yQx0l?utm_source=youtube&utm_campaign=fmas-is-back&utm_medium=video&RefId=FMAS24+Video+Ad+%5B1%5D
#fmas24 #fmas #fmevents #financeinafrica #traders #investors #affiliates #forexTraders #investmentOpportunities #B2BNetworking #finTech #Innovations #TradingCommunity #BusinessOpportunities #AfricanBusiness #Johannesburg #southafrica
📣 Stay updated with the latest in finance and trading!
Follow FMevents across our social media platforms for news, insights, and event updates. Connect with us today:
🔗 LinkedIn: https://www.linkedin.com/showcase/financemagnates-events/
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Don't miss out on our latest videos, interviews, and event coverage. Subscribe to our YouTube channel for more!
Here's a sneak peek into the FMAS:24 vibrant atmosphere! Join us at Africa’s premium financial event for a transformative experience that combines the best of finance and technology.
From May 20-22, 2024, the Sandton Convention Centre in Sandton, South Africa, will be the hub for over 3,500 attendees to engage in unparalleled networking opportunities, learn from over 150 industry-leading speakers, and explore innovations from 120+ exhibitors.
Secure your free ticket now 🔗 https://events.financemagnates.com/yQx0l?utm_source=youtube&utm_campaign=fmas-is-back&utm_medium=video&RefId=FMAS24+Video+Ad+%5B1%5D
#fmas24 #fmas #fmevents #financeinafrica #traders #investors #affiliates #forexTraders #investmentOpportunities #B2BNetworking #finTech #Innovations #TradingCommunity #BusinessOpportunities #AfricanBusiness #Johannesburg #southafrica
📣 Stay updated with the latest in finance and trading!
Follow FMevents across our social media platforms for news, insights, and event updates. Connect with us today:
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Join 3500+ Attendees at FMAS:24 | Africa's Premium Financial Event
Join 3500+ Attendees at FMAS:24 | Africa's Premium Financial Event
Looking to expand your network in #Africa? Join 3500+ attendees at FMAS:24, where online trading, fintech, payments, and crypto meet! Connect with industry leaders and innovators for an unmatched networking experience.
20-22 MAY 2024
Sandton Convention Center, Sandton, South Africa
Register now to secure your spot: https://bit.ly/3JbUpCK
#fmas #fmas24 #fmevents #networking #finance #africa
📣 Stay updated with the latest in finance and trading!
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Looking to expand your network in #Africa? Join 3500+ attendees at FMAS:24, where online trading, fintech, payments, and crypto meet! Connect with industry leaders and innovators for an unmatched networking experience.
20-22 MAY 2024
Sandton Convention Center, Sandton, South Africa
Register now to secure your spot: https://bit.ly/3JbUpCK
#fmas #fmas24 #fmevents #networking #finance #africa
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Join 3500+ Attendees at FMAS:24 - Africa's Premium Financial Event
Join 3500+ Attendees at FMAS:24 - Africa's Premium Financial Event
Looking to expand your network in #Africa?
Join 3500+ attendees at FMAS:24, where online trading, fintech, payments, and crypto meet! Connect with industry leaders and innovators for an unmatched networking experience.
20-22 MAY 2024
Sandton Convention Center, Sandton, South Africa
Register now to secure your spot: https://bit.ly/3JbUpCK
#fmas #fmas24 #fmevents #networking #finance #africa
Looking to expand your network in #Africa?
Join 3500+ attendees at FMAS:24, where online trading, fintech, payments, and crypto meet! Connect with industry leaders and innovators for an unmatched networking experience.
20-22 MAY 2024
Sandton Convention Center, Sandton, South Africa
Register now to secure your spot: https://bit.ly/3JbUpCK
#fmas #fmas24 #fmevents #networking #finance #africa
Where the Prop Trading Industry Goes from Here | Finance Magnates Podcast
Where the Prop Trading Industry Goes from Here | Finance Magnates Podcast
Explore the tumultuous world of prop trading in this Finance Magnates podcast episode, featuring insights from Head of Axi Select, Greg Rubin.
We're discussing the challenges and shifts caused by MetaQuotes' pivotal decisions affecting MT4 and MT5 users, and how Axi Select offers a unique, realistic path to professional trading, steering clear of traditional prop firm pitfalls.
Tune in for expert analysis on the future of trading and innovative funding models.
The Axi Select programme is only available to clients of AxiTrader Limited. CFDs carry a high risk of investment loss. In our dealings with you, we will act as a principal counterparty to all of your positions. This content is not available for AU, NZ, EU and UK residents. For more information, refer to our Terms of Service. Standard trading fees apply.
This content is provided solely for general informational purposes and should not be construed as financial product advice or an investment recommendation. It has been prepared without considering your personal circumstances.
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Explore the tumultuous world of prop trading in this Finance Magnates podcast episode, featuring insights from Head of Axi Select, Greg Rubin.
We're discussing the challenges and shifts caused by MetaQuotes' pivotal decisions affecting MT4 and MT5 users, and how Axi Select offers a unique, realistic path to professional trading, steering clear of traditional prop firm pitfalls.
Tune in for expert analysis on the future of trading and innovative funding models.
The Axi Select programme is only available to clients of AxiTrader Limited. CFDs carry a high risk of investment loss. In our dealings with you, we will act as a principal counterparty to all of your positions. This content is not available for AU, NZ, EU and UK residents. For more information, refer to our Terms of Service. Standard trading fees apply.
This content is provided solely for general informational purposes and should not be construed as financial product advice or an investment recommendation. It has been prepared without considering your personal circumstances.
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