April 23, 2015

Farewell letter to Alpari UK

Predicting the future isn't as fun as it ought to be.

The following letter was sent to Alpari UK's managers and board of directors on 6 April 2012, explaining how the company was being mismanaged, how it was overexposed to market volatility, and how several incompetent managers had the set the company on a path to ruin. 

My own position had become untenable as a result of the ubiquitous incompetence and abysmal performance levels amongst staff, many of whom had become demoralised by the stream of poor decisions by senior management and worsening market conditions. I, therefore, left the company in February 2012, with my criticisms and forewarnings completely ignored.

In 2011 and 2012, I spoke at length at various lectures, seminars and in my regular market commentary about the dangers of excessive risk-taking in currency markets. On 15 April 2015, almost three years to the day since my written forewarning, Alpari UK was forced into bankruptcy after sustaining catastrophic losses during the course of just one day. As a result of abysmal risk management during a bout of central bank intervention by the Swiss central bank, Alpari's risk managers steered the company to a loss of over $50 million and the company's insolvency.

Unable to meet capital adequacy requirements or find a last-minute capital infusion (having exhausted all its goodwill with corporates due to persistent unprofessionalism and naivety) Alpari was forced to draft in KPMG as bankruptcy administrators. The audit took several years to untangle all the debtors and creditors within Alpari's hollow shell. Some lucky clients recovered some of their money back, while thousands were left with nothing.

The salt in Alpari UK's wound was that its Russian subsidiary, led by a man who was also a director of Alpari UK, was in a position to refinance the company and restore its UK operations -- but chose not to do so; as a symbolic 'poke in the eye' to people that would bite the hand that feeds them.

Dear Directors and Powermongers of Alpari,

I would like to say goodbye to all of you for the final time (as I didn't have a chance to do so) with the best possible wishes and good luck for the future. In all honesty, I greatly enjoyed the time I spent working in such a promising yet contradictory company until the final year or so where my patience could bear no more.

All my calls for consolidation and the need to improve efficiency across the board were clearly well-founded – it’s just a shame those in charge didn’t have the resolve to admit it back then. If they did, maybe the horrible (and deteriorating) results you are seeing right now would have been avoided.

I joined believing talent and results would be valued above all else and with the upmost self-confidence I tried to give all that I could to a company that believed in opportunity and the freedom to seize it. I had the perception that the owners and managers were of such ilk. But over time, an invisible form of complicit denial had bred within. Denial in that no one wants to admit some obvious truths about how the company is actually being run, preferring to stay coy and complicit in their multilateral ignorance.

The fear to criticise, the fear of criticism, the fear of making a mistake, the fear of showing what you can do or even speaking out are all inevitable consequences. In other words, going the extra mile costs you more than it’s worth. Even the simple tasks require care and attention so even the simple tasks go awry when people simply stop caring - not a good status-quo for an aspiring financial services firm, in my opinion.

My criticism of broad company policy and how as a business Alpari is failing to accomplish significantly important tasks such as resolve technical issues with core products, improve and legitimise client trade execution, Treating Customers Fairly, running satisfactory KYC procedures in all territories, publishing suitable content when distributed to thousands of clients, conflicts of interest within the firm, falling morale across the company, large staff turnover, counterproductive HR department that with one hand hires talentless mercenaries and with the other enforces rigid procedures that achieve nothing aside from poor morale; lack of talent or ability in many departments, chronic waste of resources and most sadly of all, people are manipulating shockingly out-dated reporting tools for their own ends.

Revenue that should be Alpari’s is being wasted on unnecessary costs, spent on poorly negotiated empty sponsorship deals, lavish expenses and God knows what else.

The people this letter is addressed to… Many of you know this is going on because you are responsible for it but are doing nothing about it aside from keeping Andrey and the other owners onside and out of touch - keeping them in the dark about the inner workings of the business. All to protect your watering holes as well as concealing your incompetence and condescending arrogance that you are somehow improving the company despite all evidence suggesting otherwise. More clients and deposits does not necessarily represent success but I’m sure you all know that when that’s all you focus on at regular meetings.

Cause, effect and counter-effect has eventually led to laziness, mistakes, failures and so many missed opportunities; all the things that could have so easily been avoided if transparency and honesty were cherished concepts rather than mere idealism. It seems that neither words nor actions can pierce the walls that grew up around us all. This culture exists, most people know yet it continues nevertheless. So much uneven ground that even common sense has lost its way. We are all complicit to a degree but you people most of all given your positions of influence.

To all you hoity-toity standard-bearers, I put it to you that you've lost sight of what is most important in any business. Way more important than global strategy, clients, deposits, profits, costs, KPI. I’m talking about incentives. Over time you have allowed the wrong incentives to seep in, fester and corrupt everything around you, including trust and respect.

If I may cast a pearl of wisdom at you; as necessity is the mother of all invention so dis-incentivisation is the father of all minimalism. Remember, you heard it from me.

It’s overbearing and demoralising to continuously see good ideas trampled, hides tanned unjustly, emotions burnt, reality ignored and finally, a sinister minimalism descend so it is with great relief and healthy optimism for the future that I say goodbye to you all for the final time.

Good luck with your future endeavours - you're going to need it.

Having called the company's demise several years earlier, one thing rings true (especially with hindsight): Most, if not all, badly-run companies have a "skilled incompetence" problem whereby senior managers are disconnected from junior staff and reality itself -- which ultimately leads to underperformance, mistakes, demoralisation, losses and the unemployment queue.