The big boys are going all out for wealth management platforms: Will retail FX go this way?
“The FX business relies heavily on technology and brokers already have enough expertise and knowledge to compete against banks and startups running their asset management funds” says FXOpen’s Natalia Zakharova
Over recent weeks, it has been patently obvious that a very large rush toward developing wealth management platforms has been a priority for well funded financial services companies and startups alike, from every sector ranging from Tier 1 bank executives to institutional and wholesale infrastructure providers.
Just a few days ago, Mark Le Lievre, Co-Founder and CEO, who was previously global Head of Products and Platforms at J.P. Morgan Private Bank and Head of Investment Content at UBS Wealth Management raised $4 million to start a wealth management platform along with his colleagues, all of whom had been senior executives at JP Morgan and Barclays.
This is just one of many examples of recent well funded attempts to break into the electronic wealth management sector by very experienced executives going it alone by breaking away from their corporate belt-and-braces background that formed their expertise.
Other examples have included institutional software company SS&C EZE, a long-established company that has been amplifying its services aimed at the electronic trading and wealth management sector for some years now. Just a month ago, the firm launched a full end to end solution for hedge funds, portfolio managers and family offices.
Within the existing retail electronic financial services sector, companies such as Hargreaves Lansdown, the UK’s largest retail financial services company which is worth around £6 billion, has offered electronic wealth management services via its all-encompassing Vantage proprietary platform from which clients can manage all of their investments from ISAs and pensions to their CFD trading portfolio from HL Markets, Hargreaves Lansdown’s white label partnership with IG Group, and managed funds.
Hargreaves Lansdown has a vast client base, all of which is loyal and based in the United Kingdom, making it a very sustainable business compared to many of the off-the-shelf platform orientated island-based FX firms which have been challenged for many years with the conundrum of offering diversified product ranges to clients in order to stop the $200 deposit one-time-only clients in far flung regions which cost over $1500 to onboard and perhaps should not be trading in the first place.
Wealth management platform development would appear the natural progression for most well established retail FX firms. They have the expertise, they know the industry inside out and have the mettle and ability to adapt quickly to changes in regulation, technology and demand.
If there is any sector that can absolutely dominate the wealth management sector, it is the retail OTC derivatives business.
For many years, MAM accounts, Expert Advisors (EAs) which are self-designed trading robots, social trading, and introducing broker partnerships have existed, worked very well for marketing to amateur wealth managers globally over the years, but have had their limitations and in some cases have gone by the wayside.
This demonstrates that there is absolutely the innovative spirit and the collective will within the FX industry to push the boundaries of the managed fund sector, however now would be the right time to get it right and do it properly.
FX brokers should see themselves as an equal to, and in some cases far superior to wealth managers. We all remember the Woodford disaster, which FinanceFeeds highlighted as a bastion of hypocrisy in which the British authorities allowed Mr Woodford to refuse withdrawals to several clients and make off with an absolute fortune, yet if an FX broker even so much as alludes to a twentieth of this, it would be castigation time for the whole sector.
We are an industry sector that should hold its head high and be proud, and take on the traditional wealth managers as well as rival the new electronic platforms that are now racing onto the market.
Today, FinanceFeeds spoke to Natalia Zakharova, Head of Business Development at FXOpen in order to gain an inside perspective on whether FX brokers should be going down the wealth management route.
“It is better for forex brokers to invest in developing wealth management platform” said Ms Zakharova.
“The FX business relies heavily on technology and brokers already have enough expertise and knowledge to compete against banks and startups running their asset management funds” explained Ms Zakharova.
“Simply letting IBs run expert advisors will most likely lead to bad experience for the clients and will ultimately have a negative impact on the broker and the industry as a whole. Thankfully it doesn’t work in most regulatory environments though” concluded Ms Zakharova.
Absolutely. Now let’s get on with it!