Future proofing is an essential part of this fast-moving business. Demographics play a huge part. Here is an important statistic that shows the current target audience to be the right one, and a perspective on why brokers should look toward curricular education to change the future traders’ approach to their favor
Globally, there are approximately four million retail FX traders, with a median age of 35, with 1.6 million of them residing in Europe, 1.6 million in Asia, and only 150,000 in the United States.
Of these four million retail FX traders, the average deposit size is $3,800 globally, apart from in the United States where it is $6,600.
Perhaps the most important statistic to bear in mind is that, even after almost twenty years have elapsed since the dawn of retail FX trading platforms, the vast majority of traders are male.
Why is this important?
There are two significant reasons why this is an important point for retail FX brokers to consider when approaching their client base.
Whilst a very large proportion of research and development budget is being poured by FX firms into the design and production of ultra-modern trading platforms, new ancillary services that are intended to attract the Millennials which are being cited as the next generation of retail traders, thus the investment in such user interfaces and interactive technology to which Millennials have become accustomed in every other aspect of their lives is considered a means of ‘future-proofing’ by FX firms and third party software providers.
With the competitive nature of all of today’s retail brokerages, all vying for a market share in a similar field, and with the exception of those with proprietary platforms and specialist products, the challenge of continually seeking to provide a different value proposition to differentiate themselves.
This is expensive and targets a new generation of consumer – note the word consumer rather than investor – which is costly to cater for with very little return on investment compared to the generation of investors between the ages of 35 and 50 who are by and large investment-savvy and do not demand expensive ‘trendy’ add-ons from brokers.
A large proportion of technologically literate Millennials have got some income stream and no burdens such as mortgages or dependents, but do not want to think about the future and do not want to consider building a portfolio in the financial markets business, even if it is provided by a very interesting and highly advanced system.
FinanceFeeds reported recently that an astonishing 26% of 18 to 30 year olds do not save or invest anything at all, with 62% admitting that they are clueless about financial matters.
In Britain, home to the largest institutional and retail financial center which powers the markets of the entire world, one in seven young people have not considered planning for their retirement.
Indeed, the Millennials have now attracted a less than flattering acronym – YOLO – literally, “You Only Live Once”, admitting in surveys to spending all their money on nights out, fashion and luxuries rather than investing or saving.
FX firms have an average age band of between 25 and 50 with the majority of traders being approximately 35 years old, this being the very best demographic to target as the cost of attracting and maintaining them is lower than that of the Millennials, and they do not require to be entertained by gimmicks.
Now, another boost of confidence that confirms that although the retail market is competitive in that many brokers appear to be contending for the same client bases, they are indeed approaching the correct market – that being male traders with a median age of 35.
Research by accountancy company Moore Stephens has concluded research that 65% of personal insolvencies during the last 12 month period among people under the age of 25 in Britain have been women.
In the age band above that, 53% of all personal insolvencies were women between the age of 25 and 34.
Moore Stephens stated that many women in the under 25 age bracket are targeted by commercial advertising that creates higher levels of spending on consumer goods as they are more frequently targeted by luxury brands selling expensive designer goods.
Young women also spend more on accommodation than young men as they are less likely to live at home with their parents. Data from the Office for National Statistics (ONS) states that one in three young men live at home, compared to one in five young women thus men of the Millennial generation often have more disposable income.
For brokers to future-proof themselves as the most prized ‘Generation X’ (people between the ages of 35 and 50) moves gradually on and needs to be replaced by a younger customer base, a good method may well be to invest in curricular education on investing and trading via electronic platforms in order to bring up the new generation with some degree of knowledge about financial self-empowerment from school age onwards, as targeting the Millennials who have already formed their spending patterns with something that they are likely to show less interest in than a tall mochaccino is an expensive and looking at the statistics, fruitless business.