When heavyweight competitors have the ability to invest millions of dollars in their product offerings, the reality is that many smaller brokers who are limited to a generic trading platform or even a modest proprietary interface are likely to struggle to maintain client relationships in the long term. Those well-worn claims of best execution, tight spreads and quality customer service invariably lose their lustre over time, meaning best laid marketing efforts go to waste and client churn numbers remain stubbornly high. As the industry continues to mature and more broker owners are looking at sustainable business models that may also have the potential to yield a meaningful exit strategy, is a more prominent focus on the actual user experience the route to a brighter future?
The sheer number of downloads for the MT4/MT5 trading platform makes it difficult to ignore the popularity of this core product. However, with functionality being limited and brokers who want to truly support clients being left to augment this with a series of third-party add-ons, it hardly creates a slick client experience. It remains too easy for clients to be lured to other providers on factors such as price and there’s little reason for any adhesion in the customer relationship.
Smaller brokers do however have a choice here, one that can deliver a quality service at an acceptable price point. For many, committing to building then maintaining their own platform would be prohibitively expensive, but linking with an established broker who has a partner program can prove to be a genuine win-win solution. There’s no change in ‘ownership’ of the client relationship and individual brokers retain the ability to customise pricing, but at the same time can offer access to a state-of-the-art trading platform, which has been built to - and is then maintained at - exacting standards.
As Craig Inglis, CMC Markets Head of Europe, explained, “There are such clear economies of scale when it comes to platform development, that smaller brokers really will struggle to get a toe-hold if they’re trying to develop a multi-channel offering that’s built to a high specification. We invested $100m in our product at the outset and have a team of almost 100 in-house developers working to fine tune and enhance the offering every day. The economics of that only makes sense as a result of the sheer numbers of clients we are working with, both directly and via CMC Connect, our institutional division.”
The challenge goes beyond the technical task of building and maintaining the functionality of a platform, too. It seems clear that understanding how users interact with any platform and ensuring that the experience is as engaging as possible at all times will also provide a significant benefit in terms of the client relationship. Again, that’s a task which is always going to be far easier to fulfil with a bigger cohort of clients to work with.
As Inglis went on to note, “We have a community of traders who we seek feedback from on an ongoing basis, not only to help us understand what they want for the best possible user experience, but also to ensure any new developments are tested fully. There’s no point investing in enhanced functionality if ultimately it doesn’t help improve the client experience. I think this is becoming even more important for CMC, now that we have devolved commodity aspects of our IT set-up such as server management out to AWS, which has freed up a lot more developer resource internally. That means we can accelerate product releases, but again these have to be tested. A big pool of users who are willing to share their opinions again is hugely helpful here.”
Smaller brokers looking to establish that foothold in the market will inevitably have a keen eye on costs, alongside how any additional spend will impact shareholder returns. MT5 licenses offer a cost effective starting point, but once additional features and functionality are bought in to make the client experience better, the costs soon start to mount up.
“Out of the box, it’s fair to say no one does it better than CMC” was the concise assessment of Inglis, who went on to explain that the company’s white label solution was fully comprehensive, whilst still allowing for plenty of flexibility to suit individual business needs. “These brokers get the entire package with us, including access to the entire range of almost 10,000 different instruments, all backed off by a strong support network with great execution and no hidden costs. When it does come to customisation, that revolves very much around the commercial aspects of the broker’s relationship with their client; reporting tools to understand which products perform the best; and the integration of sentiment data. What’s more, that’s all available on a self-serve basis to the broker, allowing them to complete simple client admin tasks without the need to call us every time, but those prized functions such as our market-leading charting – both on mobile and desktop – and third-party news feeds, are always part of the core offering.”
Brokers do have a fine line to walk when it comes to balancing traders’ needs whilst simultaneously delivering against shareholder demands. There may be quick and cheap routes to market on offer, but recruiting and then retaining those clients remains a huge drain on resources. If brokers want to build a sustainable business model, the clear message appears to be that generic trading platforms simply won’t cut it and without a significant user base, trying to fine-tune a proprietary or hybrid trading platform will be a relentless task. As Inglis concluded “Up front, the economics on a white label proposition may look a little daunting, but it’s clear that the total cost of operation cannot be ignored. What’s the actual cost of doing this yourself, then supporting and enhancing the platform over time? Or perhaps even more significantly, what’s the opportunity cost of not simply taking a comprehensive off the shelf solution, in the first place?”