I’m about to say something scandalous: The forex and binary options industries aren’t as bad as people think. I’ve worked for
I’ve worked for forex and binary companies (henceforth referred to as ‘forbin’) for over 9 years in a variety of roles, from support, compliance, risk, marketing, management, corporate training and more. I’ve written marketing campaigns, done Q&A, listened to sales calls, trained staff in European regulations, vetted small companies and large corporate entities and I’ve negotiated deals, so there isn’t much I haven’t been a part of or seen first-hand.
A little background
Forbin is, to all intents and purposes, high stakes gambling. Not only is it legal, it is also a trillion-dollar industry. According to the Bank for International Settlements, forex trading volumes hit $5.3 trillion in April 2016 alone. These high numbers aren’t likely to decrease significantly any time soon.
What the accusers say
If you’ve ever read an article or social media post bemoaning the forbin industry, then you know what the common complaints are:
- Forbin companies force people to deposit funds
- They steal their clients’ money
- Innocent people are taken advantage of
- They don’t send clients their withdrawals when requested
(Just as a side note, those I’ve seen complaining about the industry on social media or in online forums are most often disgruntled employees, rarely clients.)
Addressing the issues
Let’s discuss these complaints head-on.
Any forbin company worth its salt has clear disclosures on its website. Visitors to the site see a message warning them that trading the foreign exchange market or binary options products can result in significant losses, either partially or fully, and that the potential clients should understand such risks before trading.
Similar to legal disclosures on emails or parking garage tickets, it is the client’s responsibility to read the warnings. Further activities such as opening an account, depositing funds and trading equals a client’s acceptance of these terms. That’s how such pesky little legal matters work everywhere.
In order to deposit funds, clients can make a credit card payment, send a bank wire or other form of electronic transfer. The funds are initiated by the clients themselves, or in some cases, they authorize the company rep. to make the deposit on their behalf. Either way, funds are not stolen. To say so is ludicrous. Strongly convince or pressure? Perhaps. Steal? Doubtful.
This isn’t to say that there aren’t some scams and unethical companies. Promises of large bonuses and guaranteed profits should be a red flag. However, to loop all firms together and claim that they’re all scams is unfair. There are plenty of firms who conduct business legitimately and above-board.
Ask any customer service representative in any industry, and they will tell you that not every customer is highly intelligent. It’s a simple fact of life that not every single person that makes a purchase makes smart decisions. Take a look at the huge amount of credit card debt, or how people rush out to buy the newest smartphones on the market they likely can’t afford, vacations they can’t really pay for, etc. Really, ask someone in retail if every customer who walks in to their store can really afford what they’re buying.
Sales reps do certainly use various (and sometimes shady) tactics to close a deal. I’m going to say something earth-shattering here…guess what? That’s the nature of sales. Have you ever bought a car? Walk into a car dealership and salesmen will surround you like a swarm of bees. They’ll tell you whatever they think you want to hear so they can sell you that car. If you can’t afford it, that’s not their problem – it’s yours. They will do and say whatever they need to in order to close that deal.
Such is the nature of sales. And so it is in the forbin industry.
I’m not saying that nothing suspicious or problematic has ever occurred; it has. However, one bad apple doesn’t spoil the bunch. If you have a bad experience with a doctor, does that invalidate the entire medical profession? Ever had a mean teacher or went on a bad date with someone who lied to you? Bad – yes. It certainly doesn’t make all educators or future dates all wrong, though.
Withdrawing funds
An often-made complaint is that forbin companies don’t send clients their money when requested. There are 3 common reasons for this:
- Insufficient funds. The client’s account simply does not have enough money to send the amount he/she requested. I’ve seen clients ask for a $1,000 withdrawal when they have a $25 balance.
- Lack of identifying documents. Pretty much all financial institutions are required to collect information from their clients. Usually, this is a government-issued ID (like a passport or national ID card) and some kind of address proof (like a water bill or bank statement). Some companies ask for 1 or 2 more documents, but the gist of it is to prove that the client is who they say they are and to fulfill Anti Money Laundering policies. Some forbin companies allow clients to trade their accounts only after these documents are received, while others permit it beforehand but require it prior to sending client funds.
- Open trading activities on the account. Depending on the amount requested, funds cannot be sent from the client’s account if there are trades actively being made. It would be like trying to slice a piece of bread while the dough is still in the oven.
There are likely other reasons and some exceptions, but these are the most usual ones. It’s therefore easy to accuse a firm of not sending client funds without understanding why. Of course, there are also companies that simply want to keep client accounts active and funds in-house. Many have retention teams whose job it is to try to keep accounts active. Such behavior is legal and legitimate, but if a client insists, the company must comply.
It’s Vegas, but without the shows
As mentioned earlier, forbin IS high stakes gambling. Stack your chips high, but the house has the advantage and though there may be a chance you return home a winner, the odds are unlikely. Don’t want to risk it? Then don’t trade. But don’t go blaming the company when you lose. Artie from Houston who takes a trip to Vegas and gambles away his money at the Mirage Hotel & Casino isn’t going to sue the casino after losing at the blackjack table. Why? He knew the risks going in!
My advice
For those contemplating trading, be smart and research. Is the forbin firm regulated in a respected Western country like the US, UK or Australia (more likely forex firms than binary options companies), or on some shady offshore location like Seychelles? What is their customer support team like? Can you speak to a person or do you get a machine? Read the terms and conditions and any small print. Don’t sign any document unless you’ve read it thoroughly and understand what you are signing. Research the company and do your homework. Visit broker comparison sites, or ask a friend who is satisfied with their broker.
Ultimately, it’s up to the client to decide whether they want to trade.
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