Alpha Group: Incentives, Regulation & Culture
Former CFO at Alpha Group
inpractise.com/articles/alpha-group-incentives-regulation-and-culture
Former CFO at Alpha Group
Interview Transcript
This is a snippet of the transcript, sign up to read more.
In terms of that model, it's obviously important that incentives are set correctly because you can profit short-term by just increasing transactions and hedging, but this is detrimental in the long term to the company's incentive to keep the client and provide value. How is the revenue that Alpha generates with the clients aligned to the clients' interests and not just Alpha's interest, which is making money?
Yes, this is an important distinction between Alpha and some of its competitors. Alpha would never say, "Look, we're a week away from the end of our quarter, we need to hit a target. I want everyone on the phones trying to sell FX to clients," because that's completely detrimental to a client's requirements. The way it works is that the portfolio managers are largely targeted on new business. They receive a set percentage of commission if they hit their new business targets. They get a percentage on their overall portfolio, but then they get double that percentage each month if they hit their new business targets.
This is a snippet of the transcript, sign up to read more.
And does it happen that clients want to place the same trade, and then you have to inform them that the firm is generally full and unable to accommodate that trade, or is that not a common occurrence?
One of the things that Alpha got caught with a number of years ago was a Norwegian client who actually had the best possible credit rating you could imagine. So, this wasn't a credit issue; it was a concentration issue. The client was affected by the biggest movement ever in the Norwegian krone at the same time they were experiencing delayed payments due to Covid. So, of course, while they could afford all the margin calls ordinarily, there was a delay, leading to short-term cash problems. These are all the kinds of things that Alpha learns about concentration—it's not just about the client's credit rating. Yes, that is a key consideration, but it's also about concentration risk.
This is a snippet of the transcript, sign up to read more.
Related Content
Copyright Notice
This document may not be reproduced, distributed, or transmitted in any form or by any means including resale of any part, unauthorised distribution to a third party or other electronic methods, without the prior written permission of IP 1 Ltd.
IP 1 Ltd, trading as In Practise (herein referred to as "IP") is a company registered in England and Wales and is not a registered investment advisor or broker-dealer, and is not licensed nor qualified to provide investment advice.
In Practise reserves all copyright, intellectual and other property rights in the Content. The information published in this transcript (“Content”) is for information purposes only and should not be used as the sole basis for making any investment decision. Information provided by IP is to be used as an educational tool and nothing in this Content shall be construed as an offer, recommendation or solicitation regarding any financial product, service or management of investments or securities. The views of the executive expressed in the Content are those of the expert and they are not endorsed by, nor do they represent the opinion of In Practise. In Practise makes no representations and accepts no liability for the Content or for any errors, omissions, or inaccuracies will in no way be held liable for any potential or actual violations of laws, including without limitation any securities laws, based on Information sent to you by In Practise.
© 2024 IP 1 Ltd. All rights reserved.