Many investors are aware of the lucrative opportunities of online trading. But one thing that steers them away from actually trading is their time commitment.
But did you know that a busy investor can still have their investment float and possibly profit from the forex market? That’s by hiring a trading account manager.
A trading account manager is basically a professional trader who plans, executes, and monitors a trade on your behalf. All you have to do is open a managed account, fund it, and let them do their job.
However, entrusting your hard-earned money to someone on the internet is surely daunting. Running away with your money is not the only concern here – there’s the fear of potential conflict of interest, unregulated practices, and misaligned investment objectives.
Do You Need an Account Manager?
As traders, our investment motivation differs. Some of us look at online trading at the lens of passive and long-term investment, while others view it as an ultimate way to build a better financial future.
However, for investors who want to profit from the financial market without all the learning, planning, and even trading – a managed trading account can be their only means.
However, time is not the only benefit of an account manager. Aside from free time, there are other benefits of hiring a trading account manager, including:
- Professional fund handling
- Opportunities to choose various investment strategies, ranging from straightforward to sophisticated strategies.
Moreover, you won’t be asked to pay your account manager if the managed trade fails to yield returns.
Finally, these managers give you full control over their trading decisions and actions. This is why having at least a basic knowledge of the financial markets is essential, especially when assessing the correctness of the manager’s actions.
Different Types of Trading Account Managers in South Africa
Online traders’ risk appetite and investment goals greatly vary, and to cater to these varying needs, managers approach trading management in three various ways.
Here are three types of trading account managers you can find in the market:
- Percentage Allocation Money Management (PAMM). PAMM managers allow you to connect your trading account to their master account. This provides you with better surveillance of your funds.
- Multi-Account Manager (MAM). MAM involves catering to multiple investors for a particular position. Investors basically pool into the investment of MAM, with their earning reliant on their investment portion.
- Risk-Allocation and Money Management (RAMM). This functions similar to copy trading, the only difference being is that investors’ selection is narrowed to licensed professional traders.
The choice is ultimately yours; however, there are technical considerations that you must take into account to ensure that the manager upholds and protects your investment interests.
The Forex Manager Must be Regulated
No financial service provider should operate unregulated. With money at risk, every aspect of their operations should be monitored by a reputable financial to ensure adherence to fair practices.
In South Africa, the Financial Sector Conduct Authority mandates that all trading managers have an FSP license, certifying that their operation complies with the Financial Advisory and Intermediary Services Act (FAIS Act).
Without an FSP license, the FSCA will recognize the business as illegal and subject it to regulatory sanctions, fines, and even jail time.
FSCA Fined and Debarred Mr. Mareo Nel for Conducting Forex Account Management without an FSP License
Mareo Nel, the operator of www.simplyfx.com, is facing 15 years in jail for failing to settle a regulatory fine of R1,000,000. The fine was imposed due to the unregulated provision of financial services to South African investors.
According to the FSCA, Nel has rendered financial services to South African investors without compliance with the FAIS Act. Additionally, the debarment followed the findings that he was:
- acting as a key person in a financial institution
- providing specified outsourced financial services to a financial institution.
Read the full statement of the FSCA regarding the matter:
There Should Be a Proven Track Record
A reliable forex account manager should have a consistent, successful performance history. This track record serves as a testament to their skills and ability to navigate the complexities of the forex market.
Here are the three key points you must look at to assess your account managers’ legitimacy:
- Ask for verified trading results: Legitimate managers will provide detailed records of past trades, including profits, losses, and overall performance. Preferably, these should be third-party verified through platforms like Myfxbook or similar.
- Seek client testimonials: Positive feedback from existing or previous clients can provide insights into the manager’s reliability, professionalism, and trading style.
- Check tenure in the industry: Experience matters. Managers with several years in the field will likely have faced and adapted to various market conditions.
A proven track record isn’t just about profitability but also about demonstrating consistency, risk management, and transparency over time.
An Established, Comprehensive, and Actionable Investment Strategy
A competent account manager should offer a transparent and well-defined investment strategy tailored to your financial objectives and risk tolerance. Look for the following elements in their approach:
- Defined goals: The manager should outline the expected returns and time horizon for their strategies.
- Risk management: A good strategy includes clear stop-loss measures, position sizing, and risk allocation to protect your capital.
- Customizability: Managers should consider your personal preferences, such as risk appetite or desired trading instruments.
Beware of managers who promise unrealistic returns or use vague descriptions like “guaranteed profits.” Forex trading is inherently risky; a credible manager will be upfront about potential losses.
Avoid Conflicts of Interest
Conflicts of interest occur when an account manager prioritizes their gain over your investment objectives. This is a common concern in forex account management, particularly when managers are affiliated with brokers. Here’s what to watch out for:
- Broker kickbacks: Some brokers incentivize managers to trade frequently, as this increases their transaction fees. This might lead to overtrading, where the manager prioritizes volume over profitability.
- Hidden affiliations: Always ask if the manager is receiving commissions or incentives from a specific broker. Independent managers are less likely to have divided loyalties.
- Transparency in fees: Ensure the manager provides a clear breakdown of their compensation structure. A reputable manager will only charge a performance-based fee, aligning their success with yours.
By choosing a manager without broker affiliations or one operating transparently within regulated frameworks, you can reduce the risk of conflicting interests affecting your investments.
Do South African Broker Offer Managed Accounts?
Yes, several South African brokers provide managed forex accounts. These accounts are designed for investors who prefer to delegate trading to experienced professionals. However, not all managed accounts are created equal, and you should carefully evaluate the options provided by brokers.
Consider the Following When Choosing Broker-Managed Accounts
- Regulation: Ensure the broker is regulated by the FSCA to guarantee adherence to local laws and investor protection.
- Manager credentials: Verify the expertise and licensing of the professional handling your account.
- Fee structure: Understand how fees are charged. Look for performance-based fees, which ensure the manager’s earnings are tied to your returns.
- Trading transparency: Choose brokers offering investor portals or dashboards where you can monitor your account activity in real-time.
Managed accounts provided by brokers are often more convenient, but they still require thorough vetting. Always prioritize regulated, transparent services to safeguard your capital.
The Importance of Finding a Reliable Trading Account Manager in South Africa
With the right account manager, you can confidently navigate the forex market, transforming your investment aspirations into achievable outcomes. Whether you’re seeking passive income or long-term wealth growth, taking the time to choose wisely will ensure your trading journey is secure and rewarding in 2024 and beyond.
Remember, the forex market offers exciting opportunities, but it also comes with risks. Protecting your investment starts with doing your due diligence: verify FSCA licenses, evaluate performance histories, and ensure your chosen manager aligns with your financial goals.
