Regular explanatory seminars for prospective clients held at City Index Israel generates 50 to 70% acquisition rate and encourages long lifetime value
A great deal of consideration is given toward the most effective method of attracting clients and maintaining their loyalty within retail FX companies, a factor which is critical due to not only the high cost and relative ineffectiveness of advertisements, but also the often short term which newly acquired clients remain engaged with the services of one specific firm.
Not only is it important to ensure that new clients remain with one specific company in order to turn a profit for themselves as well as the FX firm, but equally vital that the prospective clients are a correct fit for the company and its products.
One company which recognizes this clearly is City Index, whose office in Israel holds regular seminars aimed at explaining its services in detail to prospective clients. LeapRate attended such a seminar yesterday, held at City Index’s operations in the financial district of Ramat Gan, Israel.
Delivered in Hebrew, two presentations were provided, firstly by Meir Velenski, Managing Director of City Index’s Israel office, followed by a detailed insight into the methodology behind the company’s contract for difference (CFD) product and how it works in the real market, along with detailed explanations as to the technicalities of trading CFDs, from the perspective of independent proprietary trader and client of City Index, Ido Hadad.
Mr. Velenski opened the seminar by addressing approximately 50 potential clients, all of whom were senior in terms of demographic, and had a degree of experience in financial markets and electronic trading. This in itself demonstrates the value of providing such seminars as a means of acquisition, as the more senior and experienced investors are more likely to take a long term view and to trade for longer with one particular company than those with less experience, a profiling which cannot be achieved as effectively via standard methods of advertising.
Mr. Velenski commenced by explaining that whilst City Index, whose major shareholder is IPGL, which is a private holding company of Michael Spencer (ICAP’s CEO) and who also has a substantial shareholding in ICAP, the world’s largest inter-dealer brokers, is one of the only international multi-asset electronic trading companies that provides services to a client base within Israel, it has the advantage of utilizing its Financial Conduct Authority (FCA) license, which is held by the company’s head office in London.
“UK regulators are always looking toward the client, and in cases where issues are brought to the attention of the FCA, the client’s position is most often favored over that of the company in which the client invests” explained Mr. Velenski. “This has increased over recent years, partly due to some high profile company failures, and the overall nervousness surrounding them among potential investors” he continued.
Mr. Velenski appreciates that the FCA provides a very reliable method of recourse for clients, something which is very welcome among Israel’s often astute investors, who often check every aspect of a potential investment for potential pitfalls before commencing.
LeapRate subsequently spoke on a one to one basis with Mr. Velenski to discuss the overall dynamics of attracting a client base in Israel, agreeing that there is a very well-established bank-based electronic trading industry in Israel, with two of the country’s major banks, Leumi and HaPoalim, holding a large proportion of Israel’s traders across all asset classes, who are often loyal customers.
Outside of the banking sector, despite the vast majority of technical innovations which are used in electronic trading worldwide originating from Israel, there are very few other international companies catering for the needs of this discerning client base.
City Index recognizes that Israel is a nation with a very strong economy and a highly conservative fiscal policy, as well as a population with a very high level of understanding of the global financial markets economy, therefore, if approached with professionalism and a quality product, the small number of retail FX traders in the country are an excellent client base which can be maintained on a long-term basis.
On this basis, the firm also attended a conference hosted by Israel’s daily economic newspaper The Marker at the David Intercontinental Hotel in Tel Aviv, in order to gain access to good quality clients.
In terms of execution, Mr. Velenski stated that the optic cabling infrastructure in the UK is excellent, and latency between Israel and UK is negligable, therefore reliability of connection is similar to being located near the head office in London itself, meaning that City Index prices are obtained from London and clients in Israel see the same price as client in London with no variation whatsoever.
Independent proprietary trader Ido Hadad addressed the delegates following Mr. Velenski’s introduction to the company,
Mr. Hadad began by detailing his trading career which has involved tenures at proprietary trading desks in New York and Chicago, and that his opinion on ensuring that a profit is generated is down to efficient use of time.
He stated that “Banks bought all the buildings in New York which are occupied by trading firms, and all of the algorithmic trading companies and flash trading shops have blacked out windows to keep traders focused on their screens because trading professionally and turning a consistent profit has increasingly become time-critical, with no margin for distraction.”
“Most of the large financial institutions rely on these methods of trading, including Goldman Sachs, whose overall profit is largely as a result of flash trading” continued Mr. Hadad.
Mr. Hadad, who also presented in Hebrew, explained to the delegates that trading across many asset classes for retail traders should be approached with caution, and that aside from the geo-political factors and macro-economic considerations that should be taken into account by retail clients, that it also has in the past appeared to be “not a fair market, as the market makers can see all of the information required to make their side of the trade favorable for them, but the clients cannot see any counterparty information.”
He also considered that regardless of any asset which is being utilized as an investment, whether property, company stock or speculative short term investments, the entirety of the investment spectrum is affected solely by the money market, and that in his opinion, just four regulated jurisdictions worldwide provide reliable and structured legislature for client protection, those being the United Kingdom, United States, Canada and Australia.
Mr. Hadad gave an in-depth insight into the technicalities of CFDs, and explained that whilst he is a highly experienced financial markets professional, he found an entirely new world of trading when he brought his business to City Index Israel.
CFDs are very popular in the United Kingdom, however City Index understands that this method suits Israel’s discerning client base, with Mr. Hadad explaining that he does not know of a more comprehensive trading environment across all asset classes in Israel.
As an example, Mr. Hadad provided a theoretical view regarding the buying power that $10,000 can provide in real market when purchasing a CFD in that the $10,000 client investment represents just 5% capital, therefore providing the sum of $200,000 in a live market.
Last year, the Israel Securities Authority, Israel’s national financial markets regulator, began a consultation with the Knesset’s finance committee to restructure its rulings on non-bank financial services firms in Israel, citing that it would increase the net capital adequacy requirement to $2 million for FX firms, making a very safe environment for clients but a likely non-viability for small retail FX firms in the country, indicating that Israel’s intention was for banks to retain retail traders as clients.
City Index, being a large multinational company, are able to use the FCA license without any complications whatsoever, which Mr. Velenski stated “is the way to go in terms of correct business model, cost-effectiveness and instilling confidence into our growing client base here in Israel.”