BarroMetrics Views: It’s Your Money, Husband It! II

There has been a twist to this story but for the sake of continuity let me tell it the wa I would have yesterday.

My propective new broker answered my query about security of my funds by ‘providing a bank guarantee’. I asked for more details, and he scheduled a teleconference with his Credit Officer. In the course of the conference, I heard the Credit Officer say that small accounts were not segregated and that my account was granted ’special treatment’ because of its size. If it were any smaller, the protection would not be afforded.

Immediately upon hearing this, I lost interest in opening the account. The chasm between the two values was immense and would not be breached. I advised the prospective broker that I had changed my mind and explained why.

It’s important to understand that the difference has little to do with service but depends on a fundamental disagreement in the way the parties viewed the protection of a client’s funds.

I have no disagreement with the right of the broker to use the business model described; but, I just won’t deal with brokers who don’t view ‘protection of client funds’ in the same light as I do.  The issue is one of protection not service.

The TWIST: Last night I got a call telling me that I had misunderstood - that the firm’s viewed the protection of small trader’s funds as important as the large investor’s funds. I was further told that all funds, large or small were segregated. The additional protection by way of bank guarantee was an additional protection for the larger accounts not the only protection.

Fair enough - we were speaking on my mobile and the reception was poor. In addition, I received the preliminary due diligence report and it gave the firm a green light. Perhaps I will deal with them.

The point to this blog is to highlight the need for all FX traders to take the necessary steps to protect their funds, whatever the size of the account.

In Singapore, FX traders can rely on MAS (Monetary Authority of Singapore) to protect them; in Australia we need to take a few more steps; the same can be said for the USA - Maddoff has shown that.  But ultimately the responsibility is ours to husband our hard-earned.

Refer this blog post to a friend or colleague…