There is little debate about the elephant in the room, as we correctly identified it last year right after ESMA mandated broker disclosure about client losses. The profitability of retail clients is the biggest challenge to overcome on part of the industry if it is to continue existing for another two decades.
We recently sat down with the CEO of VIBHS Financial, Angus Irvine, to discuss the latest market changes and how the company is coping with the new market environment. Right from the get-go, we focused on the issue of retail clients profitability.
He shared that VIBHS aims to redefine its product line with a more integrated product. With clients able to build algorithms without the ability to code and also education, the company aims to educate traders and provide a long-term benefit to its clients.
“We are working to deliver to our customers an education platform in order to position ourselves as a venue for good traders. To achieve this over the past several months we are making sure that we have all the procedures and operations in place to transition our offering to a new level,” Irvine shared.
Regulatory Challenges & Product Mix Changes
In order to be able to serve a wider client base, the company also harmonized the ownership structure of its FCA and Mauritius subsidiaries. The broker’s view is that having shared management and executives is providing customers with an additional level of trust, which is very important for broker subsidiaries operating from offshore.
VIBHS Financial London got licensed in 2014 entering the market when it already held a license in Mauritius since 2013.
“Having Mauritius and London licensed subsidiaries gives us the ability to onboard clients from all over the world and we are getting more active to on-boarding more quality customers. We also recently hired Miles Eakers. He is going to develop our direct marketing effort and help us get out name out there,” Irvine explained.
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Aside from focusing on regulatory shifts, the company is strategizing on its offering. Irvine believes that the days of only having an MT4 or MT5 platform are gone and clients need to have a wider choice between different products.
This is why the company is diversifying its offering. VIBHS is offering to its customers an algo-trading platform that enables traders to build their own systems without coding skills called Torch, and the Swan platform from Star Financials. A product called Dabble also provides clients with a full exchange-trading platform.
The Chinese Challenge
As many companies operating in the Far East know, the past year has been particularly challenging. VIBHS has been one company whose focus was centered on the Asian market and once China UnionPay got blocked and brokers started facing hardships to take their money out of China, the company had to adapt to a new reality.
“Up until very recently, we have been very IB-focused. The majority of business that we’ve been acquiring in China was via contacts made at various expos and shows. Most IBs in Asia are heavily-focused on MT4 and that’s one of the conditions that a broker needs to cover in order to do business with them,” explained Irvine.
IBs aside, the harder part of doing business in China is proving to be getting money out of the country. Solutions to get money out of China are present, but when the rates for such services are upwards of 7%, the appetite on part of brokers is simply not there.
“Ultimately an STP brokerage like ours needs to be able to cover the costs of executing its clients’ orders. There clearly has been some abuse going on by many brokers operating in China, but most of those brokers never even move money out of China anyway because they b-book the flow,” Irvine explained.
The other issue that Irvine thinks is affecting the market is the ongoing trade dispute between the US and China. The additional pressure on local authorities to prevent capital outflows has been increasing. As to whether the Chinese market can become a regulated area of business, Mr Irvine thinks that nobody really knows.
“It’s a very difficult market to plan on. We just aim to do our business ethically and at present, we are not actively looking for business there. It’s a big investment just to keep a name there and right now, it is very difficult to get any proper client flow,” the CEO of VIBHS concluded.