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#1 29-01-2019 21:45:08

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Analysis: is it time to start regulating forex training programmes?

Analysis: is it time to start regulating forex training programmes?

Article originally appeared on financemagnates

Are you tired of your crappy 9-to-5 life? Hate your boss? Want to swap that Vauxhall Astra for a brand spanking new Ferrari? Then I’ve got just the career for you – become a foreign exchange educator!

Whether you’re online or in the classroom, all you have to do is market your services to a bunch of financial illiterates, promise them the ability to make thousands in minutes and you can charge them hundreds of dollars for the pleasure of seeing you stroll around in a suit as you spew nonsense about technical analysis.

Now before you get too upset, yes I am exaggerating a bit. But not too much. Browse through Google, YouTube or Twitter and it won’t take long for you to find a wide constellation of hucksters, chancers and wild boys all claiming to be ‘Forex Educators.’

Anyone who has a bit of knowledge about financial services is unlikely to buy into what these people are selling. In fact, some of them are so ridiculous, FxLifeStyle comes to mind here, that it’s amazing anyone would be willing to hand over their cash to them.

For sure, these people have been around for a while but things in the retail trading world are changing. Over the past year, we’ve seen the introduction of the European Securities and Markets Authority’s product intervention measures and, from various European regulators, a heavy emphasis on protecting retail traders.

As of yet, regulators haven’t stepped into the forex education space and, for now, it doesn’t look like they will. Still, with the retail industry under so much scrutiny and so many Gucci-clad forex educators trying to hock less than reputable services, it’s in brokers’ interest to address this issue before it gets out of hand.

Get rich quick

By and large, dodgy forex educators, whether they are running huge operations or a single Twitter account, have one marketing strategy; look at how rich I am. Do you want to be this rich? Well guess what, all you have to do is learn how to trade forex and – even better – trading forex is really easy to do, just take my $4000 course to learn how to duplicate my strategy.

Another easy way of raking in the cash is for hucksters to sell their bogus trading signals, which, as you can imagine, are guaranteed to make you cash 99 percent of the time!

Arguably more lucrative is to act as an affiliate marketer for a broker. That means the educator encourages a trader to join a certain broker and then gets paid a commission for the volume of trading that they do. Of course, that also means the broker, if they themselves aren’t just running a bucketshop operation, has to put in wider spreads to pay that commission.

Alternatively, they’ll pay the ‘educator’ an upfront fee. According to the Guardian, infamous binary options huckster Elijah Oyefeso, who also did work for AvaTrade, was paid between £30-70 for every client he signed up.

“A dream and an easy shortcut for lazy traders”

To give a better sense of what actually happens when you buy into one of these courses, here are some first-hand accounts of a couple of different forex education programmes.

“[Greg Secker, owner of Capital Index,] is offering an illusion and an easy shortcut to get there to the blissfully ignorant, some of whom will part with £2000 or so for a pile of anecdotal comments, a dodgy charting package and handful of videos, all lasting a few days, which is somehow meant to prepare them for a relaxing life of big money in Trading Foreign Exchange Markets based on a limited set of specific setups he details in his strategy.”
Paul de Souza, Founder & CEO IQ Systems UK Brands, writing about Learn to Trade

[FxLifeStyle] is a scam. I joined his course before and [it’s] nothing but garbage. His course is very basic and covers things that even novice traders will already know. His signals were even worse because every single signal that was sent was a loser. Not one single trade was profitable. I contacted for a refund and never got any reply so I reported the website to the FCA [Financial Conduct Authority].

The real deal

All of this might give the impression that there are no legitimate forex educators. That’s not the case. In fact, for genuine educators, these conments are extremely frustrating. Not only do they give the education side of the industry a bad name, they actually drive clients away from them.

That latter point may sound surprising but return to your baser instincts for a moment and think; what’s more appealing? Someone that tells you trading is hard work, time-consuming and may yield a small reward or a Louis Vuitton wearing, golden Porsche driving salesman who tells you that you’ll be a millionaire in a few hours using his trading strategy?

We get several calls every week from people that really want to learn and have just been ripped off – usually for several thousand euros,” said James Lawrence, of Knights Trading Academy. “It’s really frustrating. We’ve put a huge amount of time and effort into getting accredited and these people, who are essentially marketers and not educators, are running amok.

For Lawrence and Knights Trading Academy, accreditation meant getting the thumbs up from the British Accreditation Council for Independent Further and Higher Education (BAC) as a Short Course Provider. The firm has also managed to establish a partnership with the London Stock Exchange – something that isn’t easy for any company to do.

On top of this, some of the firm’s courses are themselves accredited by the Chartered Institute for Securities and Investment and all courses are accredited by the Body of Continued Professional Development. That means that the company is itself recognized as a legitimate educator by the BAC and the courses it provides have the seal of approval from one of England's main professional investment bodies.

The problem is that, even with these sources of legitimacy, people are still turning to dodgy educators. It’s very much akin to the problem that exists in the brokerage world where traders open accounts with unregulated companies in Aruba or the Cayman Islands and end up losing all of their money.

Time to call up the FCA

What can be done to fix the situation? Unfortunately, there’s no easy answer here. Regulators stepping in might cause negative knock-on effects but, if nothing is done, nothing is going to change.

I think the person providing education needs to have some form of regulatory certification,” Rod Martenstyn, the Founder of OSS Consult and former CEO of GKFX, says. “Educators are, in a way, a form of investment advice and investment advisers are regulated. We need to reach a point where educators are there to educate. The problem at the moment is there is no organisation governing them and, because they often work for brokers, there are huge conflicts of interest.

Bringing in the FCA might help matters. Brokers, for instance, would be less likely to interact with sketchy educators who act as affiliate marketers for them. But the regulator isn’t likely to step in any time soon. For one thing, education doesn’t fall under its scope.

We believe that providers which have education services that are directly linked to remuneration are stepping into unwarranted territory and could be in breach of Conflicts of Interests and Financial Promotion rules,” said a spokesperson for the CFD Trading and Compliance Forum. “The watchdog can and should play a more significant role in the way they supervise these firms to ensure they act in the best interest of customers, we can’t place all of the risk on brokerage firms.

Proper certification

Another problem is that there are plenty of legitimate people providing education who aren’t regulated by the FCA. On top of this, broadening the definition of investment advice to include educators could prevent potential teachers, who have a lot of experience but no regulatory stamp of approval, from passing on the lessons they have learned in their career to students.

An accredited body like the BAC should take over,” recommends Lawrence. “I don’t think the FCA has to come in and take over. If it’s done properly, accreditation can be the way to separate the good from the bad.

The sad reality is that there are always going to be con men and they will always have victims to prey on. Forex education is a part of that reality. Unless human beings defy all odds and stop believing in get-rich-quick schemes, any solution to the problem of forex educators is going to be a mitigating one, not a comprehensive one.

A combination of making the public better equipped to identify scammers and a functional accreditation system seems the best way forward. It’s in the industry’s hands and, given the extremely poor reputation, the retail trading world has, in its interest to determine the optimal way of reaching that goal.

"Anything worth having is worth going for - all the way." - J.R. Ewing



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