Exclusive: Admiral Markets’ Record 2018 in an Ongoing Industry Shift

The Chairman of the firm, Sergei Bogatenkov, shares thoughts about the the latest challenges in the industry

Admiral Markets has exclusively shared some key performance metrics for 2018 with Finance Magnates. Speaking to Finance Magnates, the Chairman of the Management Board of the broker’s parent company and co-CEO, Sergei Bogatenkov, confirmed that the firm broke multiple records last year after reporting earlier a preliminary figure which was lower.

The broker’s parent company, Admiral Markets Group AS, posted a consolidated net trading income of €32.6 million in 2018. The figure is higher by €5.6 million when compared to 2017 or 20 percent higher.

On the bottom line, the firm has also surpassed previous record highs, reporting a €10.3 million profit. The result was an annual increase of 58 percent when compared to last year. Total trading volumes spiked higher by 41 percent to €572 billion in 2018. The company had circa 22,300 active clients previous year that executed over 30 million trades.

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With these record figures preceding a soft patch for the industry during the first four months of 2019, Admiral Markets is well positioned to remain a long-term player in the retail brokerage space.

Speaking to Finance Magnates about the transformation of the sector, Bogatenkov explained: “We highly appreciate cooperation with regulatory authorities as trustworthiness in business is essential for the growth and expansion.”

In the views of the key executive of Admiral Markets, transparency and adaptability to the changes affecting the retail market are essential in order to be successful. Sergei thinks that all financial institutions with long term goals understand that changes in favor of retail clients will help to grow the business in the long run.

Critical Mass of Clients

One subject that came up in our conversation with Bogatenkov was the raw impact of regulatory changes on the industry’s corporate mix. With the drive for on-boarding clients across the globe shifting depending on the regulatory jurisdiction, the importance of having a “critical mass of clients” to keep a broker’s business profitable has become key according to the executive.

“Consolidation and scalability are very much characteristics of what’s happening in the industry now and in the following years to come. Our previous experience and statistics show that the trading volumes of retail clients are at least twice lower than sophisticated clients. Much work in terms of educating the client and leveraging analytics to come with the right calls-to-action is required to increase clients’ activity,” Bogatenkov elaborated.

One approach that the Chairman of Admiral Markets advocates for brokers is to expand a client’s portfolio. When discussing the company’s experience, he said that clients are self-directed individuals who are using online platforms for investing and trading.

“The share of that industry is estimated to be 15% of total retail money available for developed markets and continuously growing,” Bogatenkov said.

Clients are Changing

After the exponential growth of the retail brokerage industry over the past decades, new opportunities are handed to the industry from the evolution in the economic environment. The policy of central banks to keep interest rates low has driven consumers to look for alternative investments at a time of zero-interest rates.

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“The client is changing, and we are very actively following the demographic and social changes worldwide. For example, investor type clients’ segment, with up to 10 trades per month, continues to expand significantly, while the growth of traders with frequent trading has slowed,” Bogatenkov said.

This is shifting the company’s attention to millennials born in the 90s who are entering the business and reaching out to invest and trade. The Chairman of Admiral Markets shared that the interest of this generation is underpinned by trendy IPOs and the rising popularity of ETFs and passive investing already entered the minds of this population deeply.

Acquisition Costs & Volatility

The rise of client acquisition costs across the industry appears to have stabilized according to the Chairman of Admiral Markets, with competition rising, having a marketing strategy that is built on a long-term vision can be very effective in his views.

“For customer acquisition, we focus on prospective clients via data-driven practices, which helps to be effective with the costs and target prospects with a personalized approach. We seek permanent attention towards the client that has a significant influence over the success. Keeping the client active, retaining them via constant engagement is essential,” Bogatenkov said.

That said, the company is not an exception to the pains from abysmal volatility in 2019 so far. A positive correlation between the number of online brokerage accounts and the dynamics of the most regularly quoted market indices is present, and increases in demand correspond to markets that are actively moving.

All said and done, brokers can’t do much about volatility, however. The only thing they can do is remain attractive for their clients by providing enough engagement tools for their clients that are looking for the next big move. Unsurprisingly, in the views of Bogatenkov, technology is key in this aspect of the business.

Competing in Tech

Bogatenkov thinks that the industry’s consolidation phase is far from over. “We think that we are still at the very beginning of this process. In 10 years 80% of the financial firms could be out of business due to the consolidation process. The more the industry evolves, the more consolidation takes place, and big players just outrun the smaller ones,” Sergei shared.

With the key aspect of any business nowadays being centered around great technology, the retail broker industry is no different. What Admiral Markets is investing in are broad analytical tools that activate clients, Bogatenkov explained.

“We are energetically expanding the list of tradable assets and bringing new markets to the attention of clients. For that, we put much effort into the information we provide to our clients via news, educational materials, content, production, and curation. Also, we care a lot about reviews on the internet and social media,” the Chairman elaborated.

With the industry aiming to transform, Bogatenkov sees the firm evolving into a dynamic tech company. With increasing attention to IT and development of advanced and unique technological solutions, he expects that the firm will be able to deliver a new wave of innovative products to its clients.

To achieve these goals, the firm is committed to a strong international team. The company continues investing in this area and is welcoming “new superheroes” to its ranks continuously. With the dynamic changes to the sector, there is little doubt that the most competitive phase of the development of the industry is yet to come. Admiral Markets’ results for 2018 is just one example that there is still money in the bank.

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