The Financial Ombudsman has upheld a series of complaints from investors and private individuals in relation to the fees charged by some CFD brokers, which it said were too high and took effect too quickly to deduct from trading capital.
The fees charged by discretionary and advisory CFD brokers, which go beyond the scope of regular execution-only brokers in providing some degree of advice and/or management, were said to be charged at a high premium, and were quickly written off from trading capital regardless of the rate of success or return, according to the findings of the Ombudsman.
Furthermore, with many management services reported to have performed poorly over time, the Ombudsman expressed concern that the brokers concerned were not offering a good value for money service to their investment clients.
When it comes down to it, choosing a broker is one of the most difficult decisions you can make as someone new to the CFD industry, and the ruling by the Financial Ombudsman should serve as an alarm bell to those who thought brokers are all the same. Whether you’re trading solo or you’re looking for a full management service, it’s imperative that you have your wits about you and maintain a cautious, measured approach when choosing which to sign up with.
That’s not to say all CFD brokers are bad guys – far from it. In fact, the problem portion is but a small minority of the overall market. But with the potential to cause serious financial harm and to quickly and sharply eat into your trading capital, choosing a broker, particularly in the advisory sector, is a crucially important decision, and one that shouldn’t be taken lightly. With the help of our at-a-glance broker comparisons and in-depth reviews, you should be able to identify a broker that provides the extent of service you are looking for, while also being verified as a legitimate, decent outfit to do business with.