Is London dead?

Speakers Corner Is London dead?

ANONYMOUS

I am probably going to come into some flak here for not following Boris Johnson’s example of wrapping myself in the flag, along with jingoistically talking up the country and city that I work in. My reason for this is, over the last several years a constant thought has been on my mind when I think of our industry in London, namely how much longer can the London retail market sustain itself?

Now before anyone starts frothing at the mouth, let me explain my thought process. I do not mean the long established spread betting companies that also added on a metaquotes solution to their service. These can no doubt be classified as world leading in their field, having been developed in the halcyon days of the city.

Further to this, they have developed their own world leading software which has no doubt led to them being leaders in the spread betting market. However, what about the next two levels of retail FX shops, such as the start up and the brand that is around for say five years. My way of logic extended to looking at the standard MT4/5 brokerage that as a brand was started here, not the brands from far off shores who obtained an FCA license to operate in the city. Having seen how these often operate, they appear to have the standard FX consultant who talked the owner into getting a UK license and installing him as the CEO. More often than not, they often implement their whole technical ecosystem based upon kickback arrangements from the various providers, rather than based i[on the sophistication of technology and whether it is a good fit for their brand.

What is the real point in having an FCA license? Well it is good for your banking solution, which we all know is getting harder by the day to solve. From a client perspective, the license adds ‘credibility’ despite in all probability they will not fall under this regulatory umbrella. That’s pretty much it.

With regards to a lot of other international brands that have come over here. I believe that they have always

seen the license as just a step up from sponsoring a good football team in marketing terms. Of no real use to anyone, but only to a certain subset of clients who think that this is the gold standard...which sadly it isn’t..

Let’s be very honest here. 95% of FX brokerages in London run on a B Book, which the chances are they are executed in one of their many offshore entities. The only way most of us can survive is by operating on this model, where on the one hand we laugh at what we claim are banana republics, yet on the other we should be pledging allegiance to their flag every morning for giving us the ability to keep our business running.

It would be a fair assumption to make that you cannot start off as a brokerage and believe you can exist 100% on UK based clients, unlike our spread betting predecessors of yesteryear. They are not that profitable on our bottom line when we add in the sky high marketing costs in generating one UK lead, you need an owner with very deep pockets and a lot of patience to make this viable.

I think that the local brokerages can learn a lesson from our international competitors. When I attend expos both in Europe and in Asia, I am always amazed at how innovative and adaptable other smaller countries offer real solutions by way of technology that actually adds something to the service. Further to this, any online marketing needs are streets ahead when you use the proven professionals from these regions.

The last fifteen years we have been far outstripped for talent, for knowledge, marketing expertise and even compliance knowledge. We had every competitive advantage over countries such as Israel and Cyprus and they have blown us out of the water when it comes to making and developing start up brands into mature profitable businesses...where did it all go wrong?

London appears to have a misplaced self confidence from a long history of English exceptionalism, which may be correct when we look at the real institutional business conducted regarding billion GBP transactions.

However, I believe that like many other industries we have priced ourselves out of the market, with high salaries that do not give much bang for their buck (or Pound in this case), exacerbated by sky high real estate prices for a tiny office space.

When I started just over twenty years ago in financial service sales, people did seem to be more hungry as sales was a great way to start a career off. This is not meant to be a rant of a middle aged person jealous of the youth coming through. I think this shows that we have lost the dynamism that once made this city great. We had many retail sized stock brokerages that would run along the same lines as their retail FX brokerage

cousins. Why did they never transfer that buccaneering spirit into FX?

By taking this easy money of setting up what is effectively a skeleton organisational structure made solely to appease the regulator. It will inevitably lead to the slow asphyxiation of an industry that had every chance to be the world leader.

It would be easy to say that the other countries may appear to have the upper hand in being legally ‘flexible’, however we could also have opened a brand there and reaped the rewards. Moreover, having dealt with and have many connections in the compliance industry in Cyprus. In some aspects it is more stringent than the UK.

The government is not supporting the local business in a way that can make it grow. We appear to be going more towards the framework in the United States rather than the more business friendly approach that we are often told we are going to get, but is sadly never delivered.

My real fear is that Brexit will lead to the loss of more business, as we have already seen with Amsterdam out performing London for share trading. Further to this, the UK Chancellor Rishi Sunak has admitted that the UK’s discussion with the EU have come to an end with no resolution being found with regards to financial services, which will inevitably lead to a less competitive environment.

What will be the point of LDN? Will we just become a clearing house for the corrupt and a lowering of standards? Sadly I think this will be the case,as we need to be working in ever closer unions and transnational partnerships to win the new business, and not cheering our leaders when they announce a new trade deal for tariff free deal with Vanuatu!

Although I am not advocating the death of London as one of the world’s leading financial hubs, I definitely think that the clock is ticking on us for the retail FX space if we don’t get some help in the form of a regulator that is there to help business rather than kill it.

Perhaps the best analogy is the old UK car industry where we have just too many middle managers who are playing it too safe, which inevitably leads to the slow managed decline of an industry. We need to offer an environment where we can have the future Elon Musks of retail FX, not the designers of the Austin Allegro!