They promise riches, automated profits, and returns that smash their competitiors. They’re forex account managers, and they are perhaps the most advertised financial service in the whole business of foreign exchange.
Forex account managers often suggest to clients that they can use their professional experience and knowledge of the foreign exchange market to make great returns for their customers. In exchange, the client agrees to give the account manager a part of the profits.
This arrangement isn’t that far off from a modern mutual fund, or even a hedge fund. Hedge funds pool investment dollars to trade on the various financial markets. The hedge fund manager also receives a portion of the returns (many ask for 25% of the performance) and the investor gets an above average rate of return.
But forex account managers aren’t always in the same league as the well-to-do, connected, and unbelievably intelligent people who run multi-billion dollar hedge funds. In many cases, a forex account manager may just be an over-confident trader wanting to trade other people’s money out of his basement.
Forex Account Manager Services
There are absolutely professional firms that make a killing in foreign exchange with clients’ money. Some of these firms are on the cutting edge of currency trading, and really do deserve recognition for their trading success.
Others, however, are just wannabes—people who want to be a forex account manager so they open up shop.
In general, we recommend that you spend your time and money on education, not on another person who says they know more than you about making money in forex. Education is, after all, the only way to really make money in currency trading, and the best way to get a leg up.
If you absolutely want to leave your money with a forex account manager, then we can’t stop you. We don’t recommend it, but we will provide some steps that you can take to make sure the forex account manager is competent, legitimate, and perhaps worthy of your investment:
Indications of Managed Forex Account Legitimacy
1. Office – Successful managed forex account companies aren’t going to operate out of their home. They’re also not going to operate an office out of a PO box. Get an address for any managed forex account service provider to verify (with Google Earth, at a minimum) their office location.
2. High Minimum Deposits – Face it: if a forex account manager is worthy of managing your money, then they probably don’t need $500, $1,000, or even $5,000 of your investment capital. True hedge funds start new funds with minimum investments of $250,000 or more, because the reality is that managing accounts with $1,000 investments simply isn’t worth their time. If you were a forex account manager, would you rather spend your limited time on this planet with an investor seeking to invest $500 or an investor seeking to invest $1 million.
3. Audited results – Auditing companies exist for the sole purpose of identifying legitimacy in record keeping, profits, and results. For a price, an auditing firm will go to the forex account manager and collect their records, verifying that the results are correct and that stated returns are as they appear. Auditors are not in the business of lying—though some are—and an auditing firm will go out of business and face jail time for lying about returns. An auditing firms’ reputation is how they make money; they won’t ruin their reputation for the prospect of getting one new client.
4. Regulatory filings – Operating an investment firm often requires fulfilling regulatory requirements, which help separate the legitimate investors from con artists. Keep in mind that forex account managers must follow the laws when managing money.
