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Outsourcing


But you don’t have to do it all yourself. On outsourcing, Behnstedt comments there are companies, especially those using the opportunities provided by white labelling systems and processes, that have outsourced almost everything. “Tese companies just have their brand and logo still held internally; the rest is in the hands of other companies. However, others have not outsourced anything at all as they believe they can provide everything on their own. In general, we can say that outsourcing itself will not bring any added value to the value chain overall, but that it enables every piece of the value chain to be questioned in terms of ‘are we offering the right level of service here at a cost level that still allows us to operate efficiently?’. Tere is no recommended level of outsourcing but there is definitely a minimum level of service quality required!” Ralich states: “At oneZero we’ve been seeing a trend towards virtual trading desks, or outsourced risk management options, where the brokerage allows a third party to manage their risk in exchange for a share of profits. We are working with a number of such providers to help provide custom solutions for virtual trade desks that allow for flexible risk management, transparent reporting and administrative control of risk and hedging limits and consolidation of exposure monitoring across multiple platforms simultaneously.”


However, Higgins says firms need to be very cautious when outsourcing the trading desk: “Outsource everything that you


can and use serviced offices, but be very careful if you consider outsourcing your trading desk as that is where you will either make your money or lose your business. Whatever you do decide to outsource, keep a very close relationship with your suppliers and try to actively manage them.” Te dealing and risk management should be managed by the entity that holds the equity in the broker, states Leahy. “Outsourcing risk management leads to confusion and arguments. If you want to run a risk model brokerage, make sure you have the team in place to do it. We think that the end-user facing brokerage firms should focus on sales and marketing, and get paid a high percentage of the available revenues for that service, because they interact directly with the traders. At the other end of the client order is the market maker on the other side of the trader’s order.”


“Te risk management field has grown increasingly complex in the last 10 years,” adds Leahy. “We think leaving the risk management to the pros is the way to go. When you make your brokerage an agency model (pass through) there is less capital needed and a steadier stream of revenues. In short, the equity holders of a brokerage increase their return on equity with an agency business model.”


All aboard!


On what are the most effective methodologies for client on- boarding and retention schemes, Ralich says it is important to keep up with client demands by having efficient processes for on-boarding and, more critically, funding of accounts. “Once a client passes due diligence,


Ralf Behnstedt


“We believe that using a properly evolved CRM approach that will be continuously optimised is maybe the most effective way to ensure your


brokerage firm will continue to grow based on a captive client base.”


facilities such as credit card or bank transfer processing, which are hooked directly into the clients account, help expedite the delay from sign up to trading. Many of our clients are putting into place direct web-based funding mechanisms, tied into their back office or even directly into platforms such as MT4,” he remarks.


Leahy says his firm believes that brokers are still the best equipped entities to handle client on- boarding. “Some brokers use an outsourced model and ask their platform providers to act as an operations team, but firms that outsource client on-boarding


INSTITUTIONAL FX SERVICES - THE BROKERS HANDBOOK 2012/2013 | 27


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