Y-SERIES: Why Global Gold Does NOT Trade Online
At Global Gold, our allocated precious metals services are firmly focused on the preservation of wealth. For this purpose, all of our operations and processes are designed to ensure the highest possible level of safety for our clients. This commitment is especially important in relation to the growing security and privacy risks of the cyber space.
Keeping with our Group’s overall mission of protecting and growing our clients’ wealth, the service offering of Global Gold continues to focus entirely on safety and confidentiality. With this core focus and objective in mind, we have come to conclusions and taken decisions that have not always been easy from a business perspective.
One of the questions we are periodically asked is this: “Why does Global Gold not offer online trading – like everyone else”? The short answer to this is: “We’re not like everyone else”.
The longer explanation, however, is little more nuanced than that. Of course, we have closely examined the option of online trading and we seriously considered its implementation. However, we have chosen to not offer it, because we don’t think the risks are worth it.
Here, we give you a glimpse into our thinking and philosophy, as well as an idea of the measures we take to protect our clients and their assets.
Why would you need online trading in the first place?
Everything you do in investing, and in business in general, needs to be weighed in terms of risk and reward. When it comes to online trading, our clients have expressed their clear reservations against it and rightfully so: The benefits simply don’t justify the risks.
Experienced and wealthy investors generally tend to shy away from online trading and our clients also have very little interest in trading physical precious metals online, with good reason. First of all, the amounts invested by our clients generally exceed the limits of credit card payments, which creates countless technical issues for online trading applications. For one thing, wire transfers are required. The delays involved in international wire transfers make instant pricing commitments for larger trades very risky. Online trading with credit card payments is really more geared toward active investing in the retail sector. That is not the service we offer.
Moreover, our clientele is not in the business of squeezing a profit out of buying and selling at the very instant that gold prices move a blip up or down. On the contrary, they are interested in buying and holding physically allocated precious metals as a hedge or an insurance against the big picture risks and imbalances we witness in the global economy and financial markets today.
Therefore, the benefits of offering an online trading application are simply not clear in the first place. Our clients can just call us, get expert advice and place their trades efficiently without the need for online trading tools. Yes, we do offer a private client portal. However, this portal is highly encrypted and protected. And, even in the very unlikely event of a security breach, the system’s functions and capacities still do not allow fund transfers or the binding placement of trades.
“This is old school”, you might say. To that we proudly reply, “absolutely!”. Our approach is indeed old school and it’s geared 100% to the mission we pursue and to our commitment to protect our clients’ best interests.
Understanding the full array of risks that come with online trading
Wealthy families and entrepreneurs looking to safely diversify their wealth internationally will not prioritize online trading capabilities over the security of their assets and their privacy. After all, the whole point of choosing a non-bank, allocated precious metals program is maximizing and ensuring safety.
The risks of online trading are related to both the risks the precious metals dealer takes on, as well as those that pertain to you as an investor. Online trading, as discussed above, is generally a retail service, limited by the credit card thresholds.
The companies that offer online trading of (presumably) allocated metals hold their own inventories, that need to be hedged and managed. Or alternatively, they use the systems of large online trading houses and offer this service on a white-label basis. They generally do not understand, or even consider, the nuts and bolts of such a system and the risks of all the things that can go wrong.
Here is just a short list of risks and limitations to bear in mind:
Inventory risk – the dealer’s inventory needs to be hedged. The costs and operational requirements involved need to be handled very professionally.
Not really allocated – Allocated means that, at any time, you can order the delivery or sale of your allocated precious metals products. Most online trading programs compromise on this for operational reasons. Contrary to what they advertise, they operate, at least temporarily, on the basis of either fractional ownership or fractional reserves, or both. You should not be fooled by the marketing.
24-hour price coverage? – the assumed benefit of online trading is your ability to place and execute trades 24-7, and with limits. However, unless you’re dealing with a global bank, that kind of coverage is not realistically available.
System architecture issues – Of course, all kinds of software errors can lead to delays or losses that can be hard to identify and fix in time. For instance, depending on how the system and service is set up, even the mere proof of ownership can be complicated. More importantly, most online trading systems today have very general terms and conditions and use server infrastructures that are located in the very jurisdictions you may not want exposure to.
Cybersecurity risks – this is, in our view, the most formidable risk to consider. The attacks of hackers are no longer focused on large organizations. They target businesses, operations, and systems of all sizes, essentially leaving all internet users vulnerable.
A responsible and proactive approach to cybersecurity
At BFI Capital Group and Global Gold, we understand and recognize these very real risks and we take cyber security very seriously.
Our cyber security management ranges from employee awareness training and contingency planning, to insurance and technological mitigating measures. Our Group’s cybersecurity program has been declared a strategic program, driven and maintained by our top management.
The threat is real and needs to be adequately and effectively addressed. For instance, the growing number of phishing incidents in regard to communications via e-mail is of concern and needs to be addressed properly. This is why our entire group has stopped communicating sensitive information by e-mail and switched to a fully encrypted and secure messaging system that is accessed via our private client portal.
Thus, the team at Global Gold will communicate with clients through the Portal Messenger for transmission of sensitive information. All you will receive in your standard e-mail is a brief notification letting you know that you have a new message on your private Portal.
While we do use cloud technology, we are very diligent in ensuring there is no exposure of our infrastructure outside of Switzerland. In our view, at this point, cloud technology is the most secure and cost-efficient way of providing a safe infrastructure. However, if you are looking for jurisdictional diversification and wealth protection, then you need to consider where “your cloud” should be domiciled.
While we are “old school”, we do of course recognize technology as a great enabler and tool. Therefore, we do actively select and use those aspects and applications of it that offer clear advantages, without taking on unnecessary risks. On the other hand, we chose to stay away from systems that can potentially create more problems than they solve, like online trading. And the fact that “everyone else is doing it”, is not a strong enough argument for us to put out clients’ assets and privacy at risk.
Thus, before working with a program that is based on online trading services, be sure to evaluate and compare the risks and the benefits involved.