London-based provider of FX & CFDs institutional liquidity Alpha is introducing a new layer of protection for the retail clients that are referred to the company by its introducing brokers (IBs). The company is also shedding some light onto the practice, highlighting that in many cases the additional insurance policy is only used as a marketing tool.
As it turns out, while clients do get additional protection from insurance policies, those usually have a hard cap on the total payout on part of the insurer. Many brokers are offering increased protection, but in order to ascertain how much is the real protection that retail clients are getting, the should be asking their brokers for the details of the insurance policy.
Alpha is adding an additional £250,000 insurance for its retail clients with the cap on the total payout on the insurance policy amounting to £10 million. Clients also will have the option to get additional insurance depending on their needs. Alpha is starting the additional insurance coverage with the current limit due to the present amount of retail client assets it holds.
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Commenting on the announcement, the Chief Executive Officer of Alpha, Muhammad Al-Amin Rasoul, said: “I think these policies have value although I do not like what I see from most brokers selling direct to the retail customer. They don’t disclose the caps on coverage, and they don’t explain to the customers the limits of the policy.”
“They just say something to the effect of you are protected here, we have 1 or 2.5 million more that the regulatory coverage. That’s not true – the policies always have caps to the payouts and if that cap is less than your current retail assets your customers are not covered. This is false advertising. Alpha has more professional assets than retail so right now our policy is capped at 10m GBP. As those numbers grow we will increase the policy,” Mr Rasoul elaborated.