Train your traders or lose your clients

Regulation and volatility has focused the minds of providers to offer education to retail traders as a way of differentiating themselves from the competition

Retail traders now have a wider array of reliable training options available to them, with platforms investing heavily in an attempt to bolster customer loyalty.

2019 heralded a new dawn for retail trading with the UK’s Financial Conduct Authority introducing several new rules governing what providers can offer to the man in the street.

There were new restrictions on the sale, marketing and distribution of contracts for difference (CFDs) and CFD-like options. These included limits on leverage, a ban on financial incentives to encourage trading and an obligation on providers to close out customer positions when funds fell to 50 per cent of the margin required to maintain open positions. The FCA also banned the sale of binary options to retail clients.

“Public trust has certainly improved in recent years, in large part due to regulation,” says Dáire Ferguson, chief executive at AvaTrade, and a former foreign exchange dealer at Bank of Ireland and Investec.

While the ban on retail binary-options trading saw some smaller companies exit the UK market, more-established providers largely welcomed the FCA’s new rules.

“The impact has been that clients are made more aware of the risks in trading leverage products,” says Andrew Edwards, chief executive of Saxo Markets UK, adding that his company “welcomed this particular intervention”.

Teaching clients about real risks

The most noticeable change for retail customers was that companies are now required to state, upfront in their advertising, the percentage of client accounts that make a loss.

For many years, it had been no secret that the burn rate at which customers lose all their money and quit trading had previously been very high in this pocket of financial services.

With the new regulations now requiring a high-profile declaration of this figure, providers have been further incentivised to ensure this is as low as it can be.

As the regulator intended, there has since been an explosion of innovation in training and assistance to ensure retail clients have every available opportunity to enhance their trading skills.

Saxo, which sees itself as a leader in risk management, now provides videos, webinars, reading materials and seminars to enhance the trading performance of its customers.

“Helping clients trade and invest better is absolutely fundamental to Saxo’s strategy and over the long term actually benefits both,” says Edwards.

“We also provide a number of trading tools that help clients when taking on risk. These include stop losses, trailing stop losses, our unique account shield, and real-time profit and loss, portfolio and performance analysis.”

Trader training key to retaining clients

He says these initiatives have resulted in clients making more informed decisions and trading more sensibly. Overall, Edwards believes clients are now managing their risk better and generating better performance and longevity.

Saxo isn’t alone in building a suite of training products to improve the trading performance of its customers. Rival XTB says improving clients’ technical ability is now a key part of its strategy too.

Josh Raymond, director of XTB, says client education is the cornerstone of loyalty and retention. He explains: “It continues to be extremely important for our clients. That’s why XTB invests considerable amounts of money every year in providing a variety of resources.”

XTB currently offers video courses, which are designed by independent, professional traders with no affiliation to the business, to help traders build their capabilities. It has worked with well-known names in the world of trading such as Lex van Dam, Kathy Lien and Ashraf Laidi, among others.

Recent months have seen the company continue with its online trading master classes to recover figures as traders looked to get an edge, as the volatility from the coronavirus pandemic rippled through markets. Offered on the XTB platform and through its YouTube channel, XTB’s customer training programme has included subjects ranging from technical and fundamental analysis to trading psychologies.

“It’s like Netflix for traders,” says Raymond. “If you don’t like a trader, you can choose another. And we have these in different languages as well.”

The rise of online forums

The company has previously offered in-office seminars as part of its educational programme, but the COVID-19 outbreak saw these trading clubs moved to an online forum.

The explosion of online forums and video support materials has been notable in recent years, but the pandemic saw provider efforts increase still further. Another provider to have invested considerable resources in such delivery methods is CMC Markets.

Chris South, CMC Markets’ head of client management, believes such tools are embraced by new clients and experienced traders alike. “We provide a wide range of educational materials catering for both clients new to trading and experienced clients looking to continue their development,” he says.

“Our website and YouTube channel houses videos from platform intros to technical analysis techniques, while our experienced in-house market analysts provide a constant flow of news and analysis, as well as hosting regular webinars around key events, such as the US non-farm payrolls.” Like XTB and Saxo, CMC Markets is keen that its education tools are not limited to only the operational functions of its own platform.

Broadening appeal of trader training

Recent years have given way to a broadening in the number of standalone trading qualifications at degree level and above. In years gone by, trading was purely a unit, or subset, of a wider financial qualification. Now this is no longer the case.

Well-known UK universities, such as City, Coventry, Essex and Sheffield Hallam, all offer dedicated trading degrees at either undergraduate or post-graduate level.

The Sheffield Hallam undergraduate course, launched in 2019, was designed with derivatives trading group OSTC in response to what it saw as growing demand for training focused solely on trading.

Damion Taylor, deputy head of the department of finance, accounting and business systems at Sheffield Business School, explains that students on Sheffield Hallam’s course are tutored on tier-one trading platforms, used by institutional traders. They also work towards the Level-5 Advanced Diploma in Financial Trading and the Investment Management Certificate.

While a full degree may be more time than many retail traders would like to dedicate to their education, it is worth noting there are also now a host of professional providers offering shorter courses.

Recognised City training provider BPP, now a private university in its own right, offers a one-day professional training course in electronic trading and financial markets, covering equities, bonds and currency markets, for example.

The course has been marketed as suitable for “delegates with limited experience of financial markets” highlighting the broad target market for training programmes.