FX brokers: Time to capitalize on £100 million that just got withdrawn from UK fund

For many years it has been patently clear that electronic trading companies, especially OTC FX brokerages, have not made the most of their abilities to market to a sustainable and qualified audience of investors.

Long tomes on these pages have explained that lead sourcing and churning has only led to high customer acquisition costs, low deposit amounts and an over-marketed inexperienced trader base.

A need to avoid the inevitable consolidation that looms before many MetaTrader brokerages has been mounting up and is now more important than ever as virtually identical product ranges on virtually identical platforms which have a CRM full of the same clients and prospective clients as over 200 others.

This has now been compounded by the regulatory restrictions, particularly on CFD products, which has resulted in some small to medium sized brokers considering relocation.

Given these two important circumstances, a massive opportunity has just arisen in the United Kingdom.

Just a day before the British public goes to the polls in order to elect the government for the next 4 years and with the Conservative party ahead of the alarmingly socialist Labour Party, it is looking likely that Britain’s long, drawn out exit from the European Union will go ahead and Britain’s green and pleasant land will become a go-to region for retail brokers, which will be able to access a global marketplace from the most highly developed financial center in the world.

Opportunity most certainly knocks, because £100 million has just been pulled out of one of Britain’s largest and longest standing property funds, operated by veteran wealth management company M&G, which was suspended just two days ago because it was unable to raise money quickly enough to repay investors looking to cash out.

Yes, you read correctly. M&G, a highly regarded and very established company whose Personal Equity Plan branding adorned every billboard in every British town during the 1980s, has had difficulty bringing in new money to pay those withdrawing.

Imagine if a retail FX company did that! It would not just be a quick sentence, it would be a scandal. Once again, one rule for us, and another for the so-called ‘establishment’.

Marketing executives across the FX and CFD industry should see this as a huge chance to literally sticker the London Underground, rotating billboards and the television with advertisements for multi-asset trading, and FX portfolio managers, even those experienced traders with MAM accounts, should be looking toward these customers.

Given this incident, and the Woodford scandal, more and more proof is emerging that the word ‘bucket shop’ is not exclusive to unregulated small FX firms, as these large investment companies are clearly reliant on customer funds for collective margin, hence inability to continue operations should withdrawals occur, or in some cases freezing withdrawals.

Good quality FX firms can offer good quality investors a stable, multi-asset investment proposition, and most of the FX brokerages in good quality regions are so massively aware of their responsibilities in terms of risk management and the handling of client assets that it is highly likely that most would outperform some of these older, traditional investment companies and the statistics are beginning to bear that out.

M&G has a long history. It was established in 1931 in London, and is listed on the London Stock Exchange.

Under its original nomenclature, Municipal & General Securities Company Limited launched the first ever UK unit trust in 1931, the First British Fixed Trust. It held the shares of 24 leading companies in a fixed portfolio that was not changed for the fixed lifespan of 20 years. The trust was relaunched as the M&G General Trust and later renamed as the Blue Chip Fund.

By the 1980s, the company was the largest Unit Trust company in the UK. In May 2016, it announced it was to launch a direct online investment service for retail investors to invest directly in its range of funds which put it directly in competition with some of the electronic trading companies, specifically companies such as Hargreaves Lansdown.

In July 2016, M&G suspended redemptions on its £4.4 billion Property Portfolio fund following heavy withdrawals after the referendum on the UK’s exit from the European Union, yet customers continued to be loyal. This time, however, loyalty has dropped off in the form of a massive exodus.

Let’s not forget, these are high quality clients. Loyal customers with a long term view on investment and who are pragmatic and analytical, not the $200 credit card ‘gamblers’ that will have a ‘flutter’ if pushed hard enough by a lead converting telesales operative – exactly the sort of clients that the FX industry should be going for.

It would only take a few brokers to onboard all of these customers for the path ahead to be demonstrated to pragmatic, good quality retail investors and customers, we would all be revered as a technology-led, avantgarde industry sector that is where it should be – leading the retail financial markets forward.