Sitting in front of clients, or en route to a meeting in a different region of the world, many a…
Sitting in front of clients, or en route to a meeting in a different region of the world, many a colleague during my 25 years in the electronic trading industry has pondered the equation of cost of traveling, often long distance by plane, to meet new institutional clients, high net worth individuals, or introducing brokers.
It is certainly true that in my inaugural years as a PBX switch engineer for bank trading desks which I commenced in 1991, global relationships were not part of my scope, it was not long before they were. Two years later, I founded a solutions consultancy which is where the need for long distance communication began.
A global business, and indeed a global, internet-dependent, technologically centered business, the FX industry relies on an international audience which can be reached via many different models, however which is the most effective in terms of the cost of maintaining good relationships and understanding what critical partners need?
On the face of it, conference calls appear to be highly effective as they do not remove key personnel from their daily responsibilities for longer than the actual meeting itself, there are no long flights which can write off a day’s work, and there are no costs associated with travel.
The downsides however, can be deal breakers as conference calls to potential new partners can be impersonal, often lead to no action – I often find that an activity that has not required investment of time and resources from both sides is likely to be less of a priority for both parties than one in which a vested interest or capital outlay is a factor – and, well, this:
Whilst some smaller deals with lower volume introducing brokers can be done via conference calling, all of the communication barriers that Tripp & Troy rather amusingly detail in this video exist, and the true potential can never be achieved.
A few years ago, when retail FX brokerages began to focus their attentions on mainland China’s array of introducing brokers which proliferate the second tier development towns, many retail brokers looking to increase their volume and decrease their customer onboarding costs employed Chinese speaking staff in organic desks to call and onboard partners.
At that time, a widely held misconception was that many introducers of business were required in China because each one was a small entity that may refer just a handful of clients.
Meeting = knowledge. Knowledge = power
An investigation by FinanceFeeds across China’s development towns including Shenzhen, Guangzhou, Zhengzhou, Guangdong, Chengdu and Shijiazhuang revealed that many introducing brokers and portfolio managers in those regions were each producing 90,000 lots per month on average, and had offices which resemble those of a successful FX brokerage with full facilities.
A look at the corporate structures of these offices demonstrated that the long-standing relationships with retail brokerages to which the firms refer business revealed that those which made the continued effort to visit and nurture the business were those who were receiving long term order flow.
Back in 2004, Lubomir Kaneti joined FXDD as VP Operations, before becoming COO in May 2007.
From the company’s headquarters in New York, Mr. Kaneti was instrumental in establishing global partnerships, and to this day, FXDD has vast prominence in China to the point at which it could be considered that the company’s Chinese business has been instrumental to FXDD’s core business.
I met with Mr. Kaneti at FXDD’s New York headquarters, where Mr. Kaneti explained the company’s continued visits to introducers in China in order to foster relations, which solidified very long standing partnerships.
Through a great deal of research and meetings with IBs in China, FinanceFeeds clearly understands the need for brokers to which said IBs are referring business engage on a personal basis with the IBs by spending time with them, at their offices and listening to their requirements.
Whilst Mr. Kaneti firmly agrees with this, he considers there to be far more to the art of ensuring that a smooth and long term partnership can be fostered. “It is not just a case of traveling to see IBs” he said.
“The IBs have to promote their brand whilst adhering to the very stringent rules in China. They may push the limit here & there and we will call them if we see something not right to ensure that we can help them operate within the appropriate limits across the entire chain. Overall we have been very good to them and that is critical. In China, companies appreciate this kind of very detailed service.”
Entrepreneurship is paramount in China
Mr. Kaneti has a very concise understanding of the modus operandi of Chinese IBs. “The Chinese IBs are entrepreneurs in their own right, and respect companies that let them focus on building their business. They need to focus on building their network and developing more business, whilst the broker has to be reliable in delivering a comprehensive brokerage service that does not impede the IB’s goals and allows them to concentrate on their business.”
“You don’t have to be the latest and greatest, but you have to be serious and provide top quality service, and build trust. The IBs are very keen and actively looking to sell a specific premium brand to their customers, therefore it becomes easier to do so as it becomes a well known brand in China if the company provides good quality customer service.”
In terms of gaining trust, Mr. Kaneti considers it to be rather like growing a traditional British garden. “The similarity is that after several years of cultivation and attention, an immaculate lawn will result, but after the lawn has been completed, you have to go back over the parts that have already grown and ensure that no weeds have appeared, and then plant some flowers to show additional attention to detail.”
Quite clearly, a high touch model is important in China. Is this the case elsewhere? – Sort of !
Whilst it is clear that the only way to succeed in China is to foster personal relationships, in other regions, opinions vary.
Plus500 is a case in point. Here is a company with a very small payroll and absolutely no sales team, which by May 2015 had become a firm with a market capitalization of $1 billion. Here is a company which has mastered the world of digital marketing.
On the other hand, British landmarks such as City Index (now owned by GAIN Capital) had expanded their reach purely by cultivating relationships.
Under the leadership of Meir Velenski, City Index took its CFD and spread betting services into Israel, and no advertising or calls took place. Instead, Mr. Velenski encouraged a high touch model in which customers who were high net worth, experienced traders, attended seminars at the company’s offices in Tel Aviv, resulting in a loyal client base of traders who knew the business well, lowering the cost and heightening client lifetime value.
Mr. Velenski now operates his own brokerage, Velenski Financial, and continues to stand by the high touch approach, having regular meetings with clients, service providers and traveling to visit liquidity providers.
Culture eats strategy for breakfast – Peter Drucker
In London, the center of the entire institutional non-bank FX industry (as well as home to most of the interbank prime brokerages), travel is less common because of the inter-institution nature of the city’s financial sector and the proximity of each company within the square mile.
Speaking today to one of London’s experts on the FX, CFD and derivatives trading industry, travel was most certainly off the agenda.
“I think the focus on cost means there’s more pressure to conduct meetings electronically” he said.
If the counterparty is going to be “paying” for the face to face meeting anyway through wider spreads or higher commissions, then again I reckon many are hard nosed enough to forego the personal aspect.
Nauman Anees, CEO of ThinkForex explained “For a true partnership model to thrive, finding quality IB’s is key and building a long term relationship. Sometimes not every IB, White Label Partner or Money Manager is the right fit for a broker, and on paper and conference calls everything sounds good but a face to face meeting goes a long way in aligning everyones interest and building a long term business relationship.”
“Conference calls and Skype are a great way to get a relationship initially going however longer term if the business is good from a IB it makes sense to have a meeting . At ThinkForex I make it a point that we meet with our Key Partners regularily face to face to build a long lasting relationship” concluded Mr. Anees.
In America, relationships certainly matter.
Justin Hertzberg, CEO of Forest Park FX in Boca Raton, Florida explained to me this morning “As much as this industry is about euros and dollars and pounds, it is also about relationships. Where possible, I prefer to meet clients and brokers in person, shake their hand and look them in the eye. For me, five minutes in person is worth more than five months of conference calls.”
Most certainly this translates into the institutional world too. I am a regular visitor to Chicago and New York, and the electronic venues and large firms in both of those major centers rely on longstanding relationships that have been cultivated over several years.
Many retail companies look at using specialist online meeting tools such as Google Hangouts or GoToMeeting, however the use of these is far more prominent among online marketers than it is among institutional service providers or technology vendors.
In conclusion, the decision to spend on executive travel in order to understand client needs and foster the best relationships and provide an edge over the competition is very specific to the requirements and target audience of each company.
From a professional perspective, I can vouch for the absolute value in international travel in order to continue to fully understand the entire ecosystem of this complex industry, especially from a research perspective, which no doubt applies to those providing services to brokers as equally as it does to those providing detailed coverage.
Whilst the technology which commenced with instant messengers such as ICQ, which incidentally was developed by a close member of my family in the early 1990s before it was sold to AOL, has shrunk the world and increased the speed of global business, there is no substitute for the good old fashioned meeting, and in an electronic business such as ours, long may the good relationships continue.#Conference call, #skype