Do “you get what you pay for”?
“You get what you pay for”, is gospel to generations of people – particularly in America. But is it really so in the financial industry? What if we told you that it’s common believe amongst brokers, particularly in the more speculative futures and forex segments of the market, that the individual with the biggest, fanciest office is the best “story teller” in that company. And the broker in that office is NOT there because he gives you a fair deal on your transaction charge/commissions. The broker’s who charge you the most, are generally so adept at mesmerized their audience that clients sign up without even questioning that they were paying such exorbitant commissions. When the average customer sees the broker’s office they get the immediate impression that the broker must be taking good care of his customers. Why else would he be in such a nice office? It all comes back to our dream of our future. The office fits the dream. It makes perfect sense that as an up and coming trader that we would have a broker with such an office. And he would be our friend and we could visit his office when we’re in town, maybe go out for a fine lunch with him. He’s our new friend and he’s there to help us. And he’s worth every penny we pay in transaction cost because as everyone knows: you get what you pay for!
It might be hard for you to believe that a firm would build itself on the strategy of seeking out prospective clients, and tell them whatever they wanted to hear to hit the next month’s commission quota. Or is it? When paying for services, particularly ones with such a high failure rate as trading services, you can expect that the business people behind them are going to get their fees upfront. A very similar dynamic plays out in the trading education field. Fortunately there are simple ways to find out if the educator is reputable. An important distinction to make is do they hold some form of live trading room? And are they willing to let you demo it for a short period of time? Any time an educator is willing to put themselves in front of you, and a live market, and point out how and when a method generates trades and how to manage those trades, you can likely have some assurance they have an idea what they are doing. Educators today should also be subject to some form of regulatory review of their products and services. If you are considering purchasing educational products there is nothing wrong with you calling the educator directly and asking them if they are subject to regulatory review, and what form does this supervision take? For those of us in the U.S. the NFA, or National Futures Association, is charged with policing brokers and educators. From the educators standpoint any delay in getting products and marketing material approved by the appropriate regulatory agencies is going to be well worth the time. Educational products, along with products in any service industry, should be priced for a long-term reciprocal relationship with the customer — you. In the financial industry the answer to the question around the statement “you get what you pay for” is one you may not like the answer to, particularly if that mind-set dictated your own spending habits in your search to improve you’re trading.
Jay Norris is the author of Mastering the Currency Market, McGraw-Hill, 2009 and a Trading Instructor at Trading-U.com. To schedule a complimentary, interactive tutorial with Jay on determining market direction and hear more about “Live Market Exercise” go to One on One Tutorial
DISCLAIMER: Forex (off-exchange foreign currency futures and options or FX) trading involves substantial risk of loss and is not suitable for every investor. Risks include the potential that changing political/economic conditions may substantially affect the price/liquidity of a currency. Investors may lose all or more than their original investments.