Goldman Sachs jumps on retail electronic wealth management bandwagon

The current rush by large banks and financial institutions to develop electronic wealth management solutions and bring them to market has placed many Tier 1 banks and FX dealers in direct competition with the non-bank wealth management and OTC derivatives sectors. The latest Tier 1 bank to go down this route is Goldman Sachs, one […]

Will the failure of European banks benefit FX brokerages

The current rush by large banks and financial institutions to develop electronic wealth management solutions and bring them to market has placed many Tier 1 banks and FX dealers in direct competition with the non-bank wealth management and OTC derivatives sectors.

The latest Tier 1 bank to go down this route is Goldman Sachs, one of the world’s largest Tier 1 FX interbank dealers by market share, which has begun the testing of an in-house wealth management platform for retail customers.

This has taken place just a matter of days after a series of JP Morgan executives broke out from their institutional careers and raised $4 million in funding to launch their own retail electronic wealth management platform.

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.

With banks, professional services companies and even some of the world’s largest derivatives exchanges looking at this sector as a method of gaining back the retail client bases they couldn’t maintain and lost to OTC derivatives firms over the past few years, it is definitely time for retail FX brokerages to go down the wealth management route.

After all, the FX sector has the expertise and can easily outstrip the banks and exchanges in serving retail clients. It is just a case of breaking out of the old third party platform reliance and dependency on legacy systems which do not allow the ownership of brokerages’ intellectual property and engaging clients via a purpose built front end platform.

If it is hard to for MetaTrader based FX brokers to get investment from venture capital companies despite their huge expertise in running a retail trading business, yet it is easy for new start ups to raise capital for the development of wealth management platforms and the banks are also going down this route with their own money – and banks never spend money on follies -it should tell us all something important, that being the MetaTrader reliance and inability to host intellectual property on your own servers plus a limited product range shared by all white labels of MetaTrader is holding back the retail sector.

Development of your own platforms for wealth management and the ability to hold your own client base on your own systems and therefore make it part of your intellectual property plus engage the new generation of investors is where the value is.

Onwards and upwards….

Read this next

Executive Moves

Avelacom appoints Timothy Wong to run new Hong Kong office toward APAC expansion

Avelacom helps to achieve sub-millisecond speed of market data and order execution across both derivatives exchanges and crypto markets.

Executive Moves

XS.com hires Ahmed Negm, a popular market analyst on CNBC, Sky News, Bloomberg’s Asharq

“Ahmed’s expertise and passion for understanding the intricacies of the financial markets will be invaluable as we continue to grow our client base and expand into new jurisdictions.”

Institutional FX

ATFX uses blockchain to help clients verify IBs and vice versa

ATFX said it has been working on the IB verification project for a few months.

Industry News

Research market in dire straits as SEC’s ‘no-action’ letter on MiFID II lapses in June – survey

“Of all the regulatory news that has hit the research market in the last few months, this is the one change that will fundamentally impact what fund managers can access and pay for in future.”

Executive Moves

Wombat appoints ex-abrdn Richard Charnock as UK platform turns to Europe

Launched in 2019, Wombat provides a dedicated mobile investing platform – available on both iOS and Android – offering users both range and choice.

Institutional FX

Broadridge integrates Point Focal’s pre and post-market reports

“Point Focal provides a unique lens on the market which will help add alpha to the trading process and these new insights will rapidly improve performance while mitigating execution risk and simplify trading.”

Technology

XCritical integrates with Brokeree Solutions, allowing its clients to launch copy trading 

The forex software provider – XCritical, has integrated Social Trading by Brokeree Solutions into their CRM system.

Industry News

HKEX partners with Saudi exchange for cross listings, ESG, Fintech

“The Kingdom of Saudi Arabia, and the broader Middle Eastern region, are one of the world’s most dynamic and exciting economic and innovation hubs and also home to some of the fastest growing investor groups in the world. Hong Kong and HKEX’s markets offer significant opportunities for international investors and corporates, including unrivalled connectivity to the Mainland Chinese markets through our unique Connect programmes. This agreement signals the beginning of even greater collaboration between our companies and our home markets, and we look forward to exploring many future areas of cooperation.”

Executive Moves

CMC Markets Connect relocates APAC team led by Peter Foster to Singapore

“Singapore is a vibrant city and is now undoubtedly seen as Asia’s leading financial hub. The decision to bolster the CMC Markets Connect team here will help us cement the company’s position as a leading provider of multi asset liquidity and comprehensive trading solutions across the region.”

<