FXCM executive speaks out on approaching tech-savvy Generation Z traders

Imagine being sold a new car and then being told that you can only listen to music in it on an 8-track player…. Then go and try to find any available music. That is like being a Gen Z trader is like today.

For quite some time, the need for retail FX brokerages to approach a new market has been very much apparent.

Currently, the majority of existing and potential retail FX traders are those familiar with MetaTrader in its two main guises, itself being an obsolete legacy platform which offers neither brokers nor clients any degree of flexibility or diversified product range.

MetaTrader 4, which was launched in 2004, when most of the next generation of traders were using a Silver Cross or Bugaboo, is certainly not the stuff of inspiration to anyone under the age of 45, and as the current narrow band of existing traders move on, who will replace them?

Anyone with any wish to trade the electronically executed markets in future will be from a new generation who grew up with every online research resource at its fingertips, with personal technology such as smartphones and an app for absolutely everything.

The off-the-shelf route via an old fashioned platform based on an old fashioned island (Cyprus) which has made absolutely zero contribution to technology on the world stage. It is a country which doesn’t even have a railway network, where subsistence farming is still the norm, where corruption and clannish behavior runs rife, and where the slightest analog thing takes an epoch and is executed poorly. It is the antithesis of Silicon Valley, and the home of third tier affiliate marketing.

Tomorrow’s traders will require far more engagement from their providers.

Providers, rather than brokers. Tomorrow’s traders will require an all encompassing suite of products from a holistic provider. Just being a broker will not be enough.

Today, Craig Mischel, CFD Product Manager at FXCM spoke to mainstream press in London on this matter.

Mr Mischel said that younger traders have been prominent in the markets for a while now. However, with world-wide lockdown keeping more people at home alone with their devices than ever, record volatility and market opportunities being advertised in every corner of the web, the number of traders under 30 has soared as many have been flocking to retail brokers looking to beat the market and find an additional income source.

According to a quarterly survey conducted in early July from E*Trade Financial Corp, more than half of Generation Z and Millennial investors said they’ve been trading more often since the Covid-19 pandemic began, compared with just a 30% increase for the general population.

“Therefore, with more young traders in the market than ever before, the importance for high tech and app-based trading platforms is at an all-time high” said Mr Mischel.

Mr Mischel’s view is that Gen Z (the demographic cohort after the Millennials, typically born within the mid-1990s to mid-2000s) were practically born with a mobile in their hands and are infinitely more comfortable and experienced with technology and social media than even the most tech savy of their parents.

“The key to attracting this customer base is therefore through advanced and high-tech mobile apps, with easy to manage user experience tools and swift access to services. In line with this, many brokers have shifted their focus from large computer programmes onto compact mobile apps in order to suit this expanding customer demographic, who demand a slick user experience and to complete a trade within just a few clicks and from anywhere in the world” said Mr Mischel.

“Through these apps, new social features have been introduced, whereby junior traders can learn from those that are more experienced. Before these were introduced, traders often had to pay thousands of pounds to attend specialised courses and spend years gaining experience to successfully understand the markets. But now, they have easy access to online forums, or live streaming platforms with specialists and experienced traders who can help give them a quick “leg up” with helpful strategies” he said.

“A variety of trading tools is also a platform feature younger traders put emphasis on. Increasing their offering by including the latest trending new products is vital for brokers when it comes to attracting and maintaining this new generation of tech-smart traders” continued Mr Mischel.

Concluding, Mr Mischel said “Gen Z is a rising customer base, and the efficiency of mobile trading apps appears to be the next differentiator by which these customers choose their broker. Therefore, brokers must focus on mobility with increasingly convenient and available platforms that can help make the markets more attractive, accessible and enjoyable for today’s new traders.”

FinanceFeeds echos this line of thinking absolutely.

Almost two decades have passed since the turn of not only the century, but the new millennium, heralding a new era.

With the passing of the early millennial years, we can wave goodbye to a few of the accoutrements associated with that period.

We have long since waved goodbye to the Nokia telephone, luminous bracelets with the word ‘Livestrong’ embossed into them, V-neck t-shirts, and digital watches with large screens.

The passing of these trappings has led to the next stage in the elapsing of time, which is that those who were wearing diapers, or had just begun their first kindergarten classes whilst the under 30s of the early millennial years wore wristbands and coveted the latest Nokia phone are now in their early twenties and are as technologically astute, if not more so, than those two decades their senior.

If the Millennial generation, comprising people born in the mid to late 1980s, was the recipient of significant derision from its predecessors, usually via a perception that Millennials are stereotyped as lazy, entitled, and unwilling to conform. The demographic that is now into its 50s often appears to to cite similar examples of a generation who only comes to work if and when they feel like it, and that they have no idea of how to communicate because they are glued to a device for social rather than commercial purposes.

Perhaps this perception has played its part in why the trading platforms that currently exist have remained so ubiquitous for so long, MetaTrader 4 still being a prevalent front end client-facing interface some 16 years after its first release, an extremely unusual scenario in a technology led online business environment.

Change is about to be foist upon all, however, because the next generation, which is referred to by demographers as ‘Generation Z’, is now coming of age.

Generation Z is the demographic cohort after the Millennials. Demographers and researchers typically use the mid-1990s to mid-2000s as starting birth years. There is little consensus regarding ending birth years. Most of Generation Z have used the Internet since a young age and are comfortable with technology and social media.

As the earlier end of this generation now reaches adulthood and begins to enter the investment and trading arena, some interesting observations have been made by large research companies such as Forbes and Bloomberg, some of which suggest that Generation Z has rejected the beard-toting, hipster-orientated nonsense that its predecessor cultivated, and does not rebel against mainstream, conservative progress in business and education.

Quite the contrary. Being raised in an environment in which modern technology existed at the time of their birth, Generation Z is not only technologically astute but is also interested in paving a way ahead which gives them economic freedom, therefore suggesting that many members of this newly matured demographic are intelligent and sensible.

Last year, Ann Riley-Moffatt at Bloomberg this morning said “Gone are the days that investing in a beer stock or a mall operator is a good proxy for the youngest American consumers. Today’s portfolio managers trying to capture some extra returns might instead consider investing in cannabis, plant-based meat alternatives and companies that wear their values on their sleeves.”

This viewpoint goes hand in hand with FinanceFeeds opinion that retail FX brokerages need to develop multi-asset investing platforms for sustainability and to approach a new and more enthusiastic trading community.

Also speaking from North America, Bridgette Cady-Thompson, Co-founder & CEO at ARMAGA Media observed ” ETFs tracking Generation Z’s buying preferences, behaviors and influencers will have their day in the sun soon. AssetManagers that rise to meet the demand will win long-term. Retirement plans that provide more customized advice and allocation to changing and increasingly fragmented plan demographics will also win. I have the benefit of being an investor, marketer, oldest of the millennials, and mother to Gen Z and GenAlpha demographic. Pause long-hand math and coding skills for a minute ( they learn that in school). My challenge is getting them involved early in decisions for how they will earn, save, invest and spend their money to advance society and benefit from the coming wave. Now and not wait until they are adults with “real jobs”. That’s too late.”

Sydney-based marketing executive Jacqueline Allen, whose business experience spans across strategic branding for city departments across New South Wales, digital TV and real estate investment, has highlighted that digital platforms for investment are being used outside the mainstream retail trading sector. “While the use of digital platforms and technologies across youth generations may yield no surprises from this latest piece of generational research, there is real insight in workplace expectations” she said.

“Consistent with my own experience is that Millennials (Gen Y) and Gen Z want and expect authentic, values-based leadership with meaningful careers that provide the opportunity for learning, growth, empowerment and achievement. They want the kind of financial stability that the gig economy frustratingly lacks in order to fund their future and dreams” said Ms Allen.

Absolutely right. Aside from the very top end companies in the retail sector which have invested in their own trading infrastructure, such as Saxo Bank, IG Group, Swissquote and Interactive Brokers, firms will have to go down the route of Hargreaves Lansdown in developing centralized platforms that host all investments in one place, including mortgages, bonds, trading environment and retirement plans. This has been extremely successful in its home market, technologically advanced Britain, where clients are loyal and the company has risen to become the largest financial services firm in the land, worth $6 billion.

This way, future proofing will be as automated as the systems which Generation Z’s new adults use to operate their everyday lives.

Let’s not forget, MetaTrader 4 was launched before most of these people were born.

Imagine being sold a new car and then being told that you can only listen to music in it on an 8-track player…. Then go and try to find any available music.

Exactly….

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