Flashy yachts, helicopters, imagery of comfortable retirements and financial independence along with boasts of absurdly high returns proliferate the ‘education seminar’ sector. Thousands of novice traders have been stung, and educators have conflicts of interest including splitting losses with unregulated brokers and selling dummy trading software. This has gone unchecked for years, but is it about to end? We take a close look
Today marks a milestone in common sense and another development toward the raising of the standards for retail FX industry participants, particularly with regard to the user experience of traders who are beginners.
Novice traders, and the confidence that they can take to what is a vast, instant, liquid and in some cases technologically and financially bewildering global market place, are vital to the continuity and sustainability of the retail FX sector, as these are the future customers of the brokerages and introducing brokers that need eventually to replace their existing loyal customer base.
Some of the most loyal customers are those of the British, Australian and North American electronic trading mainstays, which have been established for three decades and have their own, painstakingly developed and maintained proprietary trading systems, and are staffed and led by highly knowledgeable professionals who understand their product and the global FX industry’s component structure inside out.
The milestone which today has been passed, ironically, does not involve the fly-by-night MetaTrader 4 white label brokers that are not connected to any live market via any integrated liquidity management system. It involves the so-called ‘educational’ services that proliferate the major financial centers of the world.
Flamboyant would be too complimentary a word to use in order to describe the purveyors of dubious methods which promote unreasonably high returns and promise a life of luxury and ease by simply emulating the ramblings of Rolex-toting, over-styled helicopter pilots who propagate their unsubstantiated ‘strategies’ to a wet-behind-the-ears audience who dream of early retirement and wealth rather than another decade of wage-slavery and unfulfillment.
Many of these entities are operated by one individual who often claims to have a background in successful interbank trading, or to have given up a life of mediocrity in favor of having mastered the markets, most claims of which are not able to be ratified by anybody.
For the past decade, Toronto, London, Sydney, Auckland and Singapore have played host to several self-styled ‘trading gurus’ whose aim is to dupe novices and sell them a massive dream which, unfortunately, quickly becomes a nightmare.
FinanceFeeds has conducted some investigation into the operations of such companies, and found commonality between all of them, even though none are affiliated with each other in any way whatsoever.
The emphasis is on pressure sales and over-emphasized imagery which projects wealth, power and success. The sales pitches are all equally aggressive, demonstrating how the trainer is a winner and those who do not make money are in some way inferior. Often mocking techniques are applied in order to force down the morale of the delegates to make them easier to swindle.
One firm based in London, operates from a custom-designed yacht on Millwall Dock. Its proprietor purports to have been a former Citigroup interbank dealer during the 1980s, however it is impossible to check such credentials for validity.
His course is intended to be two days, however it is often just two hours in the morning, two hours in the afternoon, with a demo account being traded by the trainer, the business model being to sell a system which is sold under the pretense that it will generate massive returns for novices, and the course being the basis for it.
This can cost anything up to $6000 ($3000 for the software and $3000 for the course), and then the trainer signs the delegates up to accounts with unregulated brokerages, then splits the losses.
The reality is dejection and a shadow cast in the minds of the novices never to trade FX again. The regulatory authorities are also not able to intervene. FinanceFeeds has contacted the Financial Conduct Authority (FCA) about this matter, the answer having been that ‘educational’ entities are outside the remit of regulators.
FinanceFeeds does not agree with this ruling, on the basis that these are not providing educational resources, but are actually giving financial advice without the accreditation to do so, and encouraging people without the necessary skills to engage in very high risk positions. This is something that does fall under the FCA’s remit, but because the entity is classified as a provider of training seminars, there is no investigative jurisdiction.
The same applies in Canada, where a large firm there conducts similar seminars and offers similar software, as well as has a conflict of interest with its clients via IB relationships with unregulated, high leverage b-book brokers in order to split the losses, yet the provincial regulators consider this to be education, hence it is outside of their remit.
In London, aside from the aforementioned, there is one particular firm that has managed to finally attract the attention of the authorities.
Where the FCA has been flaccid, the Advertising Standards Authority (ASA) has upheld a complaint against Learn To Trade’s overtly implausible advertisements.
Learn To Trade follows the same path as the examples that FinanceFeeds has seen of this type of entity. Its owner drives a Lamborghini, and often makes a point of stating that he trades from his helicopter, and that his delegates could do so also.
Imagery of comfortable retirement (many of these entities prey on senior citizens or those approaching retirement age) pepper the company’s website, and marketing and advertising are very high profile.
Today, FinanceFeeds reported that the ASA’s reasons for rebuking the firm’s marketing material was to do with claims in one of its ads for a Forex seminar were misleading, unsubstantiated and exaggerated.
The ad in question represents a Facebook post for Learn to Trade Ltd, seen on November 22, 2016. The ad stated “Discover how to get your share of the largest and most liquid market in the World. Join us for an educational FREE Forex Seminar Limited seats- Book Now! Learn the Secrets of Successful Professional Trading. Learn the power of compounding or how to make £3.5 million over the next 15 years…”.
The complainant questioned the claim “learn how to make £3.5 million over the next 15 years”.
Learn to Trade Ltd responded that 25% of their clients had a starting balance of at least £20,000 in their trading account and they taught their clients to risk only 2% of their account size on any single trade. The company explained that when starting with a £20,000 trading account, they assumed a 3% growth per month and that this would end the 15 years on £4,090,067. Learn to Trade Ltd added that they only advertised £3.5 million on the basis that not all trades were taken and to allow for a 15% margin of error.
This is absolutely in keeping with FinanceFeeds findings, online and offline. Attendees to these types of courses and purchasers of ‘cure all’ systems are often subjected to outlandish claims of vast returns with no performance data to back it up.
In November 2014, FinanceFeeds attended a conference in Holland for local IBs. One of the speakers was a trainer from Singapore whose diatribe for one hour centered on how his trading abilities were the key to all success, and everyone else who loses is doing so due to lack of intelligence. His delivery was forceful and aggressive, and it worked.
Last month, FinanceFeeds was given a sales pitch by an agent for a system called Bluucore, which makes outlandish claims on its ‘Performance’ section of its website, demonstrated here:
When approached by FinanceFeeds, our explanation to the firm being that these figures are not possible on the basis that we are aware that the company has not been in existence for as long as it provides performance over, plus the figures stated when connected with a retail b-book unregulated brokerage are simply not feasible at all.
The agent had been completely taken in, and despite our explaining the full facts and figures at length, still believed in these performance results and despite our advice, went ahead and carried on being a representative for the service.
The one region which has got this in its sights and has been effective in putting a stop to it is Australia.
Four years ago, ASIC put an end to the nefarious “Aussie Rob’s Lifestyle Trader” for its similar modus operandi. OakFX was a further scheme in the Antipodes, in which New Zealand-based Phoenix Forex fell foul of the law.
Ultimately clients were bilked out of up to $25,000 each to buy the software, which then amounted to very little or no return on investment for clients. Just three months after the New Zealand FMA warning was issued in August 2014, Phoenix Forex went belly-up, owing over $2 million to its creditors, comprised of $1.44 million to the New Zealand tax office, and $448,774 to clients, with trade creditors still awaiting their $124,148.
Phoenix Forex and Phoenix Group Ventures are directed by Kendall Twidgen, who is in her mid-twenties. In 2013 when the FMA issued its warning about OakFX she was travelling overseas with twice-bankrupted businessman Mark Brewer, who was employed at Phoenix Forex as a senior salesperson and whose sales approach involved shouting at junior sales staff and pushing them hard to sell to anyone at any cost.
In the case of the Advertising Standards Authority intervening in the UK, it may well be the signal for a larger scale examination of these services, as the outlandish and high pressure advertising and sales techniques proliferate the internet, with scores of forums showing the disdain by those who fell for the schemes, all of which is in the public domain and readable by the ASA.
Last year, FinanceFeeds discussed this at length, here is the video.