MTP Brokers Go Back In Time

Back in 2007 or so, something happened to the Margin Trading Products (“MTP”, aka FX & CFD Brokers) industry.  The industry’s largest brokers started to offer the MetaTrader 4 trading platform.  By many firms adopting a third-party platform, which was and is still available to almost any startup brokerage, the marketing battle was no longer a comparison of proprietary platforms (with little pricing pressure).  The battle for market share was now a all out price war with spreads being cut and outrageous bonus offerings to clients.  As an Introducing Broker (“IB”) in those times, I benefited as I could easily move client accounts from one brokerage firm, to whichever broker was offering me and my clients the best deal.  Since clients did not have to learn to use a new trading platform if they were to switch brokers (previously a large deterrent to switching brokers), the only defense of market share was price cutting and bonus offers.

But in the last year, with an increasing frequency, we are seeing the large MTP brokers going back in time to focusing on their own proprietary platforms and direct client marketing (bypassing Introducing Brokers).  FXCM (NYSE: FXCM), Gain Capital (NYSE: GCAP), London Capital Group (LSE: LCG) have all made significant efforts in the last 12 months to develop and push their own trading platforms.  This means more in-house technology builds, but a more valuable client when that client chooses to trade on a proprietary platform.  These companies have also worked to increase their direct client marketing to bypass the expense of paying an introducing broker for client accounts and client orders.  At FXCM, 90% of their IB Sales staff have been let go, and Gain Capital has cut as well.  Further we see London Capital Group buying a trading platform company 4 months ago and launching the platform as their own this week.

So what is the take away for someone like me who helps operate a smaller brokerage without the global reach or the financing of the largest players? A few thoughts:

  1. The larger players have financial pressures of being public and want to change from a variable cost per client order (IB-focused sales) to a “fixed” cost per client account (direct client-focused sales).  These firms believe their direct marketing efforts are controllable and have a better ROI.
  2. As a smaller firm, I can choose to learn from them and follow their lead, or I can look to take over the network of Introducing Brokers that are being cut by the large players.
  3. Finally, I need to think about the trading platform(s) that we offer.  Do we continue offering a third-party platform as our primary offering?  The marketplace currently demands that platform (MetaTrader4).  But I need to think about what our secondary platform is, and if we have the capabilities to either buy and operate an outside platform, or build our own.  **I am well-aware that running a brokerage is much different than running a software firm**

So what will we do?  We will ensure all our marketing campaigns have two-tiered approaches so that we can maintain and grow our IB network, but also increase our direct client marketing efforts.  that process is simple, but not easy as it is more work to do.  As for platforms and our dependence on a single, third-party platform at this time, I am leaning towards adding a second (though still third-party) platform as a differentiation from our competitors.  While not an ideal offering, I am not at a stage to build our own platform.  So finding a qualified platform that is not yet well-adopted by my competitors is on my to-do list for Qtr 1, 2016.




Salespeople as Hackers from C. Ganapathi

A friend sent along a great post.  It originated with Chuck Ganapathi of Tactile.  A great read, and it also added a useful word to my vocabulary: adminitrivia.


The Ultimate Hackers: Salespeople

Outside of tech circles, the word “hacker” conjures up an image of a nerdy kid scheming in his parents’ basement, or someone causing a national security crisis in the latest episode of “Scandal.”

Ask investor Paul Graham, though, and he’d say that it “connotes mastery in the most literal sense: Someone who can make a computer do what he wants — whether the computer wants to or not.” A hacker is someone who does something so clever that he or she somehow beats the system.

The prototypical salesperson is, on almost every count, the polar opposite of a programmer. The two differ in social skills, fashion sense, education, idea of fun, etc. — they seem to be on opposite ends of the spectrum. But if you look past the stereotypes, you will notice something interesting: Like good programmers, good salespeople are also hackers. They don’t hack computers — they are people and process hackers, doing whatever it takes to get a “yes” from a prospect.

Back in the ’80s, salespeople were the first to hack the daily commute. As road warriors who drove around meeting clients all day, they became the earliest adopters of car phones. always knew that remembering every detail about their customers was key to their success, so when PCs became mainstream, they hacked their memory by building their own customer database using Act! software purchased at a local Best Buy — way before the customer relationship management (CRM) software category was invented.

Times have changed, and salespeople’s daily hacks have evolved with them. Rather than rummaging through business cards, they now store and search for them all in one place — scanned using Evernote. When they are trying to get a foot in the door with a potential customer, they look for warm intros through LinkedIn. And when an agreement needs to be executed while away from the office, many salespeople use the SignNow app to sign the contract.

Much of this hacking is most likely happening without the knowledge of IT, but companies need not fear the sales hackers — they are just doing what they were hired to do: Be creative and laser-focused on generating new business. And they are doing so in ways that work best for them. So how can IT or operations managers do the right thing for the company, securing corporate data and intellectual property, while still embracing the sales hacker? Here are a few things to consider:

Amplify what’s working for them: As Graham points out, “good hackers find it unbearable to use bad tools.” Good salespeople are masters of their craft, and know how to arm themselves with the best tools. Listen to their feedback on what is working for them, and figure out a way to amplify that. If the sales team loves SignNow, get the enterprise edition for the company, and get the legal team on board, as well. If they are sending files to customers via Dropbox, get their personal Dropbox accounts to plug into the corporate Dropbox for Business account.

Time is their worst enemy: For salespeople, closing a deal at 11:59 pm on the last day of the quarter versus 12:01 am the next day could make the difference between earning 70 percent of their annual compensation or not. No wonder salespeople ruthlessly prioritize their time to focus on what matters — closing deals. If salespeople are burdened with administrivia, they will resent it and look for ways to hack around it. One common culprit is CRM. Salespeople spend all day communicating with customers via calls, emails or at in-person meetings, and at the end of the day, they are expected to come back home, open their laptop and record all those activities into the CRM system so managers can have visibility. Instead, salespeople are finding ways to automatically log their activities by syncing the tools they use every day — email, calendar and phone — to CRM.

Security and productivity shouldn’t be mutually exclusive: It’s understandable that some view this kind of sales hacking as rogue behavior, especially given the fear of losing control of confidential company information. The reality is that most employees act responsibly, with the same goal in mind as the company — being more productive and closing more deals. A new generation of software makers are creating technology that avoids the false dichotomy between information security and employees’ personal choice when it comes to the tools they use to work. And if your favorite salespeople from your legacy software vendor tell you otherwise, remember, they are just doing what they do best — hacking you.

10x engineers can change the fate of the company and so can the top salespeople. And just like great programmers, these sales hackers value their professional freedom. Empowering them to work the way they want to work is the easiest hack to improve top-line growth.

Purposely Slow Starts

I have recently made a decision to spend my first 30 mins or so each day without opening my e-mail.  Many have said the same thing for a long time, but I have finally tried it.  Rather than be distracted by what “they” want, I think about what I want and need out of the day (and a bit of the next few days).  It makes me much more productive.  The past month has been great for me.

But miss a day or two and I feel out of sorts; being reactive rather than proactive.  So as Chet Holmes said, pig-headed determination is the only way to make it stick.