White paper on dormant clients and how to maximize your FX client database
FX industry veteran and senior executive Meir Velenski explains how to maximize dormant clients, and how to engage high net worth investors, what retained value and income is involved, and how to grow the bottom line of an FX an CFD firm
By Meir Velenski, CEO, Velenski Financial Group
Growing your business
All businesses are constantly looking for new clients and this is the most natural way of growing a business. In fact the amount of funding and marketing spent on this part of the business probably counts for over 30% of the total costs of a business.
Global businesses from Coca Cola,GM Motors, Apple to name but a few are very focused on building their brand and attracting new customers.
The cost of getting that customer on board varies according to the business concerned and each of the businesses have their own challenges.
CFD/SB and FX market
The Global CFD and FX marketplace is one of the most eager and hungriest arenas for getting new clients on board. This eagerness will further be fed by the recent FCA announcement of limiting or cutting leverage on CFD products to protect the retail customer.
These firms like CMC,IG,Plus 500 and many others will have to uickly establish and adapt new business strategies to cope with the change. In addition the new strategy will be tested by the retail trader and will have to compensate somehow the trader for the lower leverage and margins.
A average new client that signs up with a CFD/FX firm costs around $1241 as a CPA based on overall marketing costs, account set up costs and departmental costs in compliance ,KYC, new account opening procedures and on boarding to trade.
The average initial deposit of a new client is approximately $1500, with the longevity of about 90 days. CFD firms are battling and trying to find ways to either lengthen the longevity or make the client more profitable to the firm.
Most CFD firms and FX firms are B book operators in a varying degree of sorts. The range varies from the firms that look to B Book everything but will hedge a percentage such as established British spread betting and CFD companies with proprietary platforms including IG Group and CMC Markets, as well as specialists like Saxo Bank, right the way to the absolute B-book with zero hedge like Plus 500.
The challenge for these firms is that as fast as they want the lossess of the clients into their bank accounts they also want the client not to be burned out.
In fact there is a fine line between encouraging the client to trade more so accelerate his losses with the parallel approach of trying to educate the client via seminars and webinars and generally understanding more in depth financial markets.
All of what has been mentioned is based on new clients, profitability and keeping a high rate of return from each client.
High Net Worth
CFD firms have even gone as far as trying to establish HNW desks with VIP traders. Unfortunately most of them have missed the connection and don’t have the foggiest idea on how to cultivate a good working relationship with HNW clients and what makes them tick.
This is such a specialized area that firms have approached this in a naïve way hoping that the title VIP trader for HNW clients will suffice. However, true VIP clients are complex and only part of their portfolio of assets maybe in the CFD business. Since the VIP trader has little business experience then there will not be a true empathy or synergy with the HNW client.
In this are the markets needs to rethink what type of person or candidate would best suit the VIP client.
The biggest untapped are of the CFD business are the masses of dormant clients lying in the IT vaults of the firms that have not been tackled or addressed.
The ratio of active clients to Dormant is about 1:4. In other words there are 4 times more dormant clients then active at any one time. Poor resources and poor approach to activating dormant clients has led the industry to forget about the hidden treasure that they are sitting on and ignore the fruits that can be born from a simple uncovering of the moss that has grown over this database.
Remember at one time all these dormant inactive clients were your new sign ups that gave the CFD firm good quality income and growth. Somehow these accounts have been disregarded or simply ignored in the pressure to seeks new pastures .
Its worthwhile noting that your dormant client is another firms new client, and this is what is happening. With the constant Digital bombardment and advertising clients are moving away from their host firm to other firms. Plus 500 did this on a massive scale, by simple advertising betting on an” up or down market” and therefore making the trading decisions quick and easy for the client.
If a CFD firm can reactivate 5% of their clients , the costs would be a lot less than a new client based on a CPA of $1241, the cost of activating a dormant client will probably be approx. $180.00. In addition the other benefits are that the CFD firm has all the details of the dormant clients in addition to their, Financial details, their trading history and most important the reason why they started trading with the CFD firm in the beginning.
In other words, there must have been a reason why the client chose the CFD firm in the beginning. There are many strategies in how to maximize the hidden income of retained clients and this can be looked at in more detail when I consult firms, and is not for this forum.
The proposed action to start addressing dormant clients’ needs to be built clearly into an acceptable business plan, with set targets and goals over a set period of time. The revenue that can be generated from a positive energetic approach to activating dormant clients will have other benefits.
1: Revenue generating at a cheap cost
2: Reputational revenue showing you still care
3: Marketing revenue that the CFD firm is mentioned again and put in front of the client
4: Locking out competitors by you calling as opposed to the competition
5: There maybe positive financial change in the clients circumstances, Inheritance, Salary increase
6: Moving from storage data to active data
In the present demanding market environment then the need to look at retained value and retained income is a must and is one way that will allow CFD firms to grow and add to the bottom line. Directors and shareholders will be looking in earnest to enhance profits in light of the recent FCA Announcement to get the business and their shareprice back on track.
Meir Velenski is CEO of Velenski Financial Group who specializes in high net worth clients and penetrating new markets for the CFD FX market. Meir has extensive experience having working in financial markets for over 25 years. Meir Velenski is a recognized industry expert and has built a solid reputation in the city of London helping small and large firms build and focus on their businesses looking for hidden value with good opportunity. He is often called upon to comment on industry news and events looking to offer another opinion on financial systems and sales growth.