Here at The Armchair Trader, we are focused on providing our readers with a choice of brokers that will appeal to a range of trading styles and experience. They have to be regulated by a major Financial Authority and in our mind, reputable.
We were really impressed with the sensible approach that Founder of Financial Spreads, Adam Jepsen, took with his clients in the run up to the EU Referendum and felt there should be a place on The Armchair Trader comparison tables for his brokerage.
We wanted to find out more about Financial Spreads and interviewed Adam to understand his motivations and goals for the business. We have published the interview to enable you to get to know the brokerage a little better:
An Interview With Adam Jepsen
What was your motivation for setting up the Financial Spreads?
There were a couple of factors.
Firstly, my own frustrating experience of trying to trade shares during the dot com bubble.
I just wanted to get in and out of trades quickly but the whole process was a nightmare for short-term trading.
You had to call your stockbroker and they didn’t always have a price. If they did there was a massive spread which could easily have been 20 or 30% of the underlying market. A 20-30% spread meant that the market had to move a lot before you could breakeven let alone make a sensible profit.
It also meant that a lot of trading opportunities that I called correctly just slipped by.
For the avoidance of doubt, I was no genius. It was just common sense wanting to short these companies that had high valuations while they haemorrhaged money, had minimal growth and a negligible client base.
The second factor was that by 2007 and I had just spent 7 years in sports spread betting. I loved that industry but wanted to move on to something more serious.
By 2007, the financial spread betting market was already solving many of the irritations that I faced in the early 2000s.
I liked the principle of a trading account which gave quick access to buying/shorting a wide range of markets.
However, I thought the financial spread betting market was underdeveloped, some of the spreads for the key markets were unnecessarily wide and while there were a couple of big market leaders, there weren’t that many user-friendly platforms.
The markets are extremely complex but there is no reason why putting a trade on the FTSE 100, a US stock or crude oil should be complex.
Likewise, an obvious way to attractive more price-sensitive clients was to tighten the spreads.
Hence, Financial Spreads was born, i.e. a simple user-friendly financial spread betting platform with tight spreads.
In a crowded market, how does Financial Spreads differentiate itself from other brokers?
It’s easy to get carried away with adding a lot of bells and whistles to the platform and we have recently upgraded our charts. We’ve also let clients trade CFDs from the same account.
However, it’s important to stay true to your roots of maintaining a simple user-friendly web platform and mobile apps. If it ain’t broke, don’t fix it.
Competitive pricing is still important and our spreads certainly remain competitive. However, there is much less difference these days in the pricing between the main players.
Customer service has always been important. With a lot of the products become increasingly similar on price, apps, charts and so on, good customer service is a differentiator.
An extension of that is that we are not a Market Marker. This removes a potential conflict of interest with our clients. Our prices just track the underlying market.
If a client makes a profit or loss on a trade, it is because the market traded at the relevant level, it’s not because we moved our version of the market.
For me, it’s import that Financial Spreads remains a good quality, easy-to-use, friendly, “does what it says on the tin” brand.
What are the most popular markets traded through your platforms?
If you put gold and crude oil to one side, the popular markets tend not to change much from year to year.
Our trading stats are dominated by EUR/USD, the FTSE 100, DAX 30 and the Dow Jones.
Crude oil and gold often see the biggest variances from year to year, depending upon whether they are seeing big market moves (and getting a lot of media coverage).
If you add the S&P 500, NASDAQ 100, Australia 200, USD/JPY, GBP/USD and AUD/USD to the list then the above 12 markets will probably cover 85% of our trades in a given year.
While we offer a lot of individual shares, these tend not to be that popular in spread betting and CFD trading. They may only account for 5% of our trades in a given year.
Tell us about your suite of Platforms and their execution performance?
Naturally we have a user-friendly web platform.
We also have user-friendly apps for the iPhone, iPad and Android based mobiles and tablets.
Earlier this year we upgraded our systems to speed up the execution and increase automatic order execution levels. That update was less to do with complaints and more to do with wanting to both improve the service and make it more efficient.
Of course, if more trades are executed automatically that means the dealing desk can spend less time reviewing trades that come through to them.
The stats show that most clients see 99.65% of trades executed automatically and the remaining 0.35% are referred to the dealers.
For our high frequency clients, about 1% of trades are referred to the dealers. That makes sense when they are trading so much closer, time-wise, to the price moves.
Having said that, it still shows that there is still work to in order to get to the elusive scenario of having tight spreads and 100% automatic execution.
What type of trader would benefit most from Financial Spreads products and services?
Anyone who wants to quick and simple access to the global markets.
We don’t charge a commission on trades (our profit margin is priced into the spread) and so with tight spreads, like EUR/USD @ 0.7pt and the UK 100 @ 0.8pt, as well as good execution, we suit high frequency traders.
Likewise, we don’t charge clients if their account is inactive so we suit infrequent traders.
Our charts also lend themselves well to traders who like their technical analysis.
If someone is looking for automated trading then they probably want the MT4 platform. Unfortunately we don’t offer MT4 or automated trading but we are looking to add MT4.
Financial Spreads probably isn’t that suited to traders who want to buy and hold positions for the medium-long term. However, that’s more to do with the cost of holding positions with spread bets and CFDs.
With spread bets and CFDs the ‘rolling’ charges, i.e. the overnight financing fees, tend to add up after a while.
So even though our overnight financing fees are normally only Libor +2.5%, traders looking to buy and hold a medium-long term positions may be better off using a different financial product such as ETFs or owning the physical stocks, i.e. where the costs of opening and closing a trade are often higher but the cost of holding the trade is normally lower.
How do you support inexperienced traders?
Firstly, it’s a question of helping clients with their risk management.
To help clients with their risk management, and irrespective of their experience, we add a Stop Loss on every trade, i.e. an order to put a limit on a clients downside.
It should be noted that Stop Loss orders are not guaranteed, if a market slips then the order will be filled at the next level that’s traded.
Of course, clients can make their Stops Guaranteed. Like any insurance, we charge a small premium for that but we only charge our clients if the order is triggered.
Also, some of our more experienced clients don’t like Stop Losses orders being added automatically, so we let those clients opt-out.
Secondly, we also have a free demo platform which is great for helping clients getting used to the platform, charts, trading orders etc.
The demo platform is also a useful for traders with less experience.
Thirdly, it is important to remember that spread betting and CFDs are high risk.
If someone is inexperienced with trading, then jumping straight into spread betting or CFDs might not be the right thing to do.
A key part of our process is protecting potential clients before they open an account and so we ask applicants about their trading experience.
If an applicant is too inexperienced and they don’t have the requisite trading experience through work, a relevant course or other suitable experience, then we won’t offer them a live account. Although they can still use the Demo Account.
Clients with too little experience are better off going on a course, and learning more about the markets, pitfalls and risks and then coming back to us.
Tell us how your relationship with FINSA Europe benefits your clients?
FINSA is regulated by the Financial Conduct Authority (FCA) and they provide clients with much of the behind the scenes elements that may not be immediately obvious.
For example, FINSA run the trading desk, risk management and compliance/regulatory side of things.
The key benefit for clients is probably the regulatory work. E.g. through FINSA, Financial Spreads clients are covered by Financial Services Compensation Scheme, it’s also FINSA that ensures that all client funds are ring-fenced.
Likewise, while Financial Spreads and FINSA work closely together, there is separation between the two companies.
This means that if a client has a complaint and the Financial Spreads Customer Support team cannot resolve the issue then the Finsa Compliance Department is on hand to take over the issue.
Having said that, it’s rare the Customer Support team cannot resolve a client complaint.
Spread betting and CFDs are leveraged products which carry a high level of risk to your capital. You can lose more than your initial deposit so you should ensure spread betting and CFDs meet your investment objectives and, if necessary, seek independent advice.
About Financial Spreads
Financial Spreads is a trading name of Clear Investor Ltd. which is an appointed representative of FINSA Europe Ltd., company no: 07073413. FINSA Europe Ltd. is authorised and regulated by the Financial Conduct Authority, registered number 525164. Registered Address: Office 701, Tower Bridge Business Centre, 46-48 East Smithfield, London E1W 1AW, UK.