Forex Trading and Sports Sponsorship – An Ethical Dilemma
Watching the Champions League final between Barcelona and Juventus the other day, I remembered an article I read last year about how the brokerage company IronFX agreed to pay nearly 3 Million Euros for a sponsorship deal with FC Barcelona.
After doing some research to see who among the most recognised retail FX brokers is sponsoring who in the world of sports at the present moment, I came up with the following results (I don’t claim this to be a complete list):
- IronFX is still FC Barcelona’s official partner with worldwide association (except for Spain)
- Exness is sponsoring Infiniti Red Bull Racing’s Formula One team
- IG currently sponsors the English rugby union Harlequins
- SaxoBank is an official business partner of Lotus F1 team and Lotus F1 Team official driver Romain Grosjean
- Plus500 is sponsoring the Spanish football team Atletico Madrid
- FXPRIMUS is sponsoring the English football team Manchester City
- FxPro is sponsoring the 7th edition of Monte Carlo’s International women’s volleyball competition and Monaco Optimist Team Racing regatta
- Swissquote Bank is the official forex and online financial trading partner of English football team Manchester United
I can think of several benefits the FX companies are after when doing sports sponsorship deals:
- convey a message of strength to prospective customers. You have to be well established and earn enough in order to spend large amounts of money on such arrangements
- get a major boost in credibility by association with worldwide respected teams and/or persons
- global brand awareness
- boost of the brand’s status by association with co-sponsors which are household names like Coca-Cola, Nike. Audi and many others
- targeting a predominantly male audience, which is in line with the core demographics of forex traders
But there are also some major problems with this kind of mass market advertising that are rarely if ever discussed, being glossed over in triumphant press releases and media reports. For starters, marketing what is a professional activity – trading – in this way to the general public conveys the message that it is undifferentiated from gambling – a recreational activity that is too well known to sports fans. The fact that online betting companies like Bwin or Betfair also use sports sponsorships to build their brands adds to the confusion of the public. A second problem has to do with the very high costs involved (as compared for instance to targeted online campaigns and signing on successful introducing brokers) for questionable returns in what essentially is the creation of the wrapping. If a trader isn’t happy with what’s inside – trading platform, trading conditions, customer support and so on, he won’t stay just because that particular broker happens to sponsor a football team. The third problem, and perhaps the most important, is the fact that trading gets to be portrayed in a false and misleading way. From the eight brokers mentioned above, I found FXPRIMUS to be the worst offender in this respect and I’ll use it to better illustrate my point. The following quotes are from Manchester City’s website, Club News section and dated 02 June 2015:
FX trading and football might have more in common than you think… For those of you who enjoy the EXCITEMENT, SUSPENSE and SPEED of the beautiful game, then you have already experienced the THRILL that our traders experience when they make money on a trade.
The harsh reality is that some 90% of those who open a trading account for the first time will lose most if not all of their deposit within the first year. Trading with real funds is the last place where one should be looking for excitement or thrill.
This is where we step in. We are FXPRIMUS, renowned for offering one of the safest and most thrilling experiences in online forex trading, globally.
There’s that ‘thrill experience’ again. Sounds more and more like the advertising for an amusement park.
Simply open a new trading account, and explore the lucrative world of online trading with FXPRIMUS.
That’s a good example of misleading statement. The world of online trading might be lucrative, but only after years of studying and working hard to develop the necessary skills to succeed. When opening a new account, it’s not lucrative at all, just the opposite. Some people may think that the above statement could apply to experienced traders who are switching brokers – but I very much doubt it, as the whole ad page would surely put off any knowledgeable trader.
Legally speaking, there’s no wrongdoing as the asterisks and the small-font risk disclaimers are all in place. But from an ethical point of view, I believe that mass marketing as represented by sports sponsorship and especially adverts like the ones above shouldn’t be employed by any trading company that respects itself and its existing or potential customers.