Empowering corporate hedging clients with options
w/ Rob Wensak
Watch this Talking Hedge episode with Rob Wensak, Treasury Trading Consultant and ex Treasury Trading Director at Western Union, where we discussed the importance of coaching clients when it comes to understanding the market and what options are right for them in corporate hedging – and why this is more important than ever in the current climate.
Rob Wensak spent 10 years as Treasury Director for WUBS EMEA and was responsible for all FX risk management, hedging and pricing across the region. Prior to his role at Western Union, he was a senior trader at Travelex and Thomas Cook and has over 25 years of experience in all aspects of FX trading, cash management and hedging of physical cash.
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YOU WILL HEAR MORE ON
[00:02:28] Client empowerment – coaching clients and sharing knowledge
[00:08:34] Digitalization of hedging products providing transparency in hedging
[00:15:33] Long-term strategies pay off when the economy is tough
[00:20:23] Ethical hedging
[00:00:00] Pritesh: Good morning. Welcome to the 8th episode of Talking Hedge. I’m your host, Pritesh Ruparel, Chief Commercial Officer at Assure Hedge. Today on Talking Hedge, I’m very proud to be joined by a friend and very well-known man in the industry and in the treasury circles, Rob Wensak, who’s the former Treasury Trading Director at Western Union.
Rob’s got over 25 years of experience in all aspects of FX trading, cash management, and hedging. He spent many years focused on the travel industry at Travelex and Thomas Cook, then spent 10 years in Western Union as Treasury Director. Half the city, I feel, has been trained by Rob at some point. We’re very lucky to have him on the show. We’ll be discussing the importance of coaching treasury clients, so that they feel confident when choosing the right tools when it comes to things like FX hedging.
Welcome, Rob, and thanks for coming and joining us. Maybe to begin, it’s always good to get a bit of a background from yourself rather than the trumped up intro that I gave you, for those that don’t know you.
[00:01:18] Rob: You covered a couple of things fairly well. I’ve worked in foreign exchange in different forms for my whole career. starting with Thomas Cook, while we were buying and selling physical bank notes and travelers’ checks, through to trading jet fuel for their airline. Then in Travelex, where we became a lot more business to payments focused using commercial foreign exchange. Then with the Western union, buying a business off of Travelex, we’re expanded what we did in terms of the business payments and the type of clients would be looking for. The focus became a lot more for a movement from support in simple fours, to using options for our hedging and expanding out what we did in that side of things.
It’s been an interesting journey, with the different types of owners. For private owners, to UK banks, German banks, US corporates, and everything that goes along with working for all these different ownership structures. That’s one loot, in a nutshell.
[00:02:28] Pritesh: Yeah. I’m sure there’s a lot. We could probably do half an hour about you. Maybe we begin by just starting off by talking about how you approach talking and coaching a client, especially SMEs who are completely new to hedging, and helping them to understand options as a product.
[00:02:50] Rob: I’m a big proponent of coaching and empowering people to know exactly what they’re going for. I think a lot of the time with FX brokers and the like, we’ll be ringing up an SME; they don’t understand foreign exchange, they don’t understand hedging. They are sold a product by the sales person in the company that they think is suitable, but the decision is often almost taken out of the hands of the company that you’re doing the hedging for. They don’t necessarily have the understanding.
For me, I think you build trust and rapport with the customer by explaining all the options. I was never in the sales side; I would quite often go onto sales calls with particular clients that had a need that was a little bit more complex than others. I’d just talk them through why we’re doing this situation, and all the decisions that I would come to get me to that point.
I think giving someone that understanding, and almost helping them come to the decision about what product they will use and how they want to hedge themselves, builds that trust up, and the longevity of the relationship works quite well. Yeah, I’m all in favor of giving people the information. I think as a business, you can still generate your revenue by having customers that have got knowledge as much as you can with customers that haven’t got knowledge. You’ve got the potential, because you’ve got almost a value add, you can build the products.
[00:04:39] Pritesh: Do you think complexity with stuff like Tufts and times and products, makes it all that much harder, or it’s just the same thing just in more detail?
[00:04:51] Rob: It’s the same thing in a bit more detail. Sometimes it’s judging who you’re talking to, and getting a feel for how well they understand what you’re describing to them. There are awesome complex products out there, and you could be talking to an SME, a small engineering company, talking to the owner, he’s built this business up, he’s got an engineering background. He’s probably going to be able to get to grips with that side of things; the different hedging products, a lot better than someone who’s perhaps working in just an import export or someone who’s a good salesman and sourcing products, but they’re not necessarily mathematically minded to understand what they’re getting involved in. Although sometimes with those people, they might be a bit more willing to take the risk of not being necessarily fully protected as others would.
For the sales person to know their client, know who they’re talking to and what decisions can that person make for the company, it’s like spending hours explaining it to someone who’s not a decision-maker, who’s them going to go off and try and explain it to somebody else and probably then get held back because they haven’t explained it very well.
[00:06:16] Pritesh: Obviously the markets have shifted quite a few times significantly over the last few years. How do you, when you’re talking to a client, prepare them ahead of key events or things like that, that maybe you as a treasury director see coming because you’re sitting there with all the global banks in the world talking to you? How do you translate that to an SME?
[00:06:41] Rob: It’s finding a balance between wanting to get across. There’s a big event coming up – Brexit is the most recent big event that we’ve had – without creating too much fear. You want your clients to be really focused on what’s going to happen or what the potential outcomes are, without getting them to a point where they’re so fearful that they either don’t do anything and don’t protect themselves, they don’t put their hedging in place; or they over-hedge and then they’re going to have problems later on down the line.
Again, I think it’s that trust in that relationship. When you’ve got that, someone’s going to take you seriously when you give them a call and you say, “This is what’s happening. Do you want to have a talk about what could happen if we get certain outcomes, and how you can then protect your business going forward as we move through that journey?”
I think those things are always a lot easier to do when you’ve got something such as the Brexit vote. You’ve got to fixed date, you know something’s going to happen on that day. That’s pretty easy to handle. The ones that become more difficult are the COVID-19’s, the terrorism events, global disasters, whatever it is – things that just come out of the blue. You’ve then got, if you’ve got enough understanding about your client and what the client’s got on that book already and what they’ve got coming up, it’s them being able to say, “I can react quickly to this. I know this customer’s going to be impacted by certain event; how can we come in to help you mitigate the risks on the back of that?”
[00:08:34] Pritesh: A firm like Assure Hedge, our core purpose is to get hedging to everyone. That’s broad, covers the broad purpose. A big part of that is digitizing hedging products and providing transparency in hedging. My question to you is: how do you think this evolution of digitization and the FX options market has happened? Is it improving transparency or is it still limited to the distributors like Western Union or companies like that, and hasn’t quite filtered through to SME?
[00:09:06] Rob: It’s a difficult product to digitize. Over the years, we’re doing your spots and you forward trades. You’ve got multiple platforms in front of you. You know what you want to do. You click, deals done. It’s booked; you haven’t got to worry about it. It’s updated your position, and it’s all well and good. Over the years, we’ve been promised by multiple providers; you’re going to have the ability to do all your products online. It was very slow in coming. There was a lot of focus on, it was some of the multi-bank providers that were wanting to try and bring something in where you could get lots of price comparison very quickly and easily, which understandably with spot spreads so low, on a race to the bottom, hedging is where people were looking to make some money. They’re quite protective about how open they wanted that information to be, which would make it difficult for corporates because anybody can go on to an Apple or Google and find out what the spot rates are doing in an exact moment in time. But to try and understand even an option product, it’s very difficult to get a price if you haven’t got the tools in front of you.
In the last maybe two or three years, there’s been an expansion within, certainly the providers we were talking to (Western Union), of their online option product offering. Both from our sales guys’ point of view, and our point of view on the backend to cover these trades, having that ability to price things up with several providers at a time, to look at the price is number one. One of the great things I found about it was you’ve got the ability to check when you’ve done something wrong. You think you’ve done the same product and it’s complicated, it’s got 52 legs – have I got that right? Because the moment I click here, I’m committed. We are a treasury professional team, that can still make mistakes. Trying to get that ability back out as the corporate user is quite critical. You don’t want as an option price, as someone on the sell side you don’t have to spend your whole day having customers ringing you back up when it’s got to the confirmation stage, and going, “We got that wrong. We’ve got wrong data in there and the wrong notion.” All of a sudden any revenue you’ve made on the sell side, you’ve spent it having to go in and try and fix it online looks that people don’t want on the platform. I think having that ability is useful.
Also, I think it’s a little easier sometimes to learn about the product if you can price something up. You’ve got a good platform to go on and have a look at it. If you’re just talking to somebody over the phone, you’re talking about ideas and they’re trying to sell something back to you, to try and see exactly what that looks like and to be able to quickly adapt and change things; having it online is massively beneficial. Coming back again, if you’ve got the customer you would give them the knowledge, they can then go onto a platform such as Assure Hedge. They can build out their products. They can try out different ideas. They can model things in different ways. By the time they come to you to execute a trade, you don’t have to spend hours of going through looking at different ideas and strategies, because the person’s built that. They’ve been online, they’ve done everything. They’ve had a really good look, have had a play around, and then they can just come in and do the execution. It’s much more efficient.
[00:13:11] Pritesh: It sounds like there’s still a fair amount of work to be done on the microstructure of the options market, where things have changed very quickly on spot forward maybe. That digitalization is there for everyone.
[00:13:28] Rob: Yeah. It’s been an area that’s been needing to grow and develop. I think hedging has transformed over the years I’ve been involved in the business. You had three options: you could do a spot trade, a fixed forward, or you could do an open forward where you could draw down any point in a period of time. That was it, for probably two decades. There was an options market, but it wasn’t open to the SMEs. Back in one of Thomas Cook days, we used simple structured options to hedge the holiday. Back then you printed out a brochure, you don’t have to put a price in it for your holiday that you were going to sell it. But 18 months’ time was when you were going to pay for it. We would use options for hedging on that side of things. But we were a big company; we were owned by a bank, we had access to that market.
But now the options market is open to anybody. That wouldn’t work if it wasn’t for having a digitized having ability to do things online and to get a price quickly. That was one of the challenges when Western Union first started having clients, was the time it would take to get a price back. We’re so used to the instance pricing. Here’s a price, there’s a price. You sit there and you go, “I want a price on that.” You could be waiting a couple of hours, but your client doesn’t really want to commit because they don’t know it yet. You can’t the build your hedge. It’s the little things.
It’s exciting; online platforms that are reliable, you can trust them. You can execute quickly.
[00:15:33] Pritesh: Cool. The last year’s been particularly tough for a few industries, travel being one of them. Maybe for those people that are logged in, who maybe are quite unsure about putting longer term hedges or what happens if they get a sudden shock to their business, maybe you could just talk through how you maybe help them unwind hedges, so they don’t lose everything. The worst scenario is the market just disappears and they’ve got exposure to hedges with brokers or banks, and that often deters them from putting the money in the first place.
[00:16:09] Rob: We had the Western Union with COVID. We’ve got travel clients, they’ve got their hedging in place for the next two years, all of a sudden nobody’s traveled. These companies were taking a massive hit on the back of the fact that nobody’s traveling, and having to do the refunds. But they had also this hedging book in place.
I think it’s important from a management point of view of an FX broker, that you keep control of looking after your customer. That is the number one thing. You’ve got salespeople out there who we will see it as an opportunity, but you need strong management to make sure that you have got your salespeople out there taking advantage of scenarios like that for short-term gain. I’ll have to say, Western Union were really good at looking after their customers through that time.
Looking at exactly what we’ve got working out, what the costs were, trying to judge whether there’s a bit more optimism in the future or we could just roll products on for a little while or we could take some of it out. Was there any hedging in place that was in the money that we could close out for them and return that cash to them? For sure, there were scenarios where us being able to do that or return the cash to them rather than retaining in our own book, which would have been taking advantage, meant those companies were able to continue trading.
Having clients that understand what they’ve got on the books, they can understand as well whether they’ve got things that run around with the money and how that’s looking. It can make a huge difference with the customer if they’ve got a trusted provider that they’re working with, that they can go on openly and honestly trust. Everybody knows that a company’s got to make money to continue. But equally, you’ve got to keep your customer going, if you can, to keep your revenues going in for longer term. I think that’s a key part of how you help people out in times of difficulty like that.
Equally, from a risk point of view, internally if Assure Hedge wants to look at a client, can we do something that helps tide them over, that’s perhaps going to put a dent in our pocket but we can keep this client going from through these next few months where we foresee some difficulty but we know that things are going to open up again? There are things there as well that providers should be looking at.
[00:19:09] Pritesh: It just shows the big part, definitely something Assure Hedge is making a big play on next year, but has discovered in the last year how important credit is in its role of getting hedging to SMEs. It’s getting credit, managing how you get credit, and how you keep it there, that’s the key. Like you say, you don’t want to be offering credit and then when firms need it most, having to pull it back immediately. You’ve got to find that balance, which is not always easy to do.
[00:19:40] Rob: No, it’s never easy. But I think there’s companies that are going to be able to be nimble enough, and have the decision makers there that will be able to win in that market. Some others have got very strict, rigid sets of rules that they can’t have the flexibility. I think those companies will be the ones that start to drift away in the background over time, because your client relies on you for these things at key times. It’s often just finding a way to make it happen, that works for both parties.
[00:20:23] Pritesh: The question that I think we can’t avoid, and we touched on it a little bit, is ethical hedging. The key thing people would like to understand from you is how you balance helping a client who’s been oversold products, with them getting something that work for them long-term.
My own view is; complexity of a product isn’t necessarily a thing. It’s how it fits into an overall hedging strategy and keynote. Complex products can be suitable for retail clients, if correctly explained what part it plays in the portfolio. It could be a very valuable hedging tool for the actual business. Just wanted to get your view on that.
[00:21:02] Rob: Again, you’re absolutely right. I’m reading from the corporate hedging managers that I have worked with. You got to be expert. Your customer is relying on you to be the expert in those products, and to be able to explain it in a way that is simple enough for them to understand; and to demonstrate the bigger picture of what they’ve got and what their book and their position of hedging looks like going forward with different trades on board.
My experience, there were people out there that were probably overselling hedging products to people that didn’t need it. Equally, we have one scenario, going off to a client meeting, and the customer is going, “I’m doing these trades, but I seem to be losing money,” and went back to simple forwards. He would’ve been sold a forward product, when really the way his business model worked he just leaves swap trades. He was adjusting his products daily, intraday. He didn’t need a hedging product; it was coming back to costing money. Going on to that and having that conversation with them from my point of view, again, this was something in the travel industry, and looking at what they were doing or the majority of the day-to-day stuff, to say, “This is what you need for that part, that will mitigate those losses. But you do still need some hedging for this part of the business that you haven’t thought about looking at. You weren’t planning on that side; you were just trying to be reactive to it.”
Internally, I think it’s strong management, it is good training of the people you’ve got working within the hedging business, so that they can put that story across, explain, understand the customer’s business, their model, what they need, what their risks are down the line; and then putting together a strategy that works for them. That can include quite complex products, a mixture of everything that works well. But making sure that the overall picture is understood, of what people have got and what they haven’t got, and how that’s changing over time.
[00:23:26] Pritesh: We’ve got five minutes left, I’m just going to answer a couple of questions that come in as we wrap. Somebody says, I’ve just started my own FX brokerage through a number of white label partnerships. Any advice you’d have to stay customer centric in your approach when there’s so much pressure to hit targets in the early stages?
You’ve mentioned a big management structure for the bigger firms, but this is coming more from the startup-type setup.
[00:23:54] Rob: It is upon seeing it. You do need to generate revenue. But I like to look at the relation of the customer as it being a bit longer term. I know it’s hard to do. People target what they need to make today, what they need to hit this month or this quarter. But I think if you’re building that trust, it becomes a pipeline. As you help a business, they’re going to grow and then you’re going to grow on the back of their growth. It kind of follows through on that. There’s no easy answer for it. Everyone’s going to hit that number, but it’s having that understanding, that trust in what you’re doing, and trust in the relationship for both sides, then growth comes along.
[00:24:54] Pritesh: One other question for you, Rob, now that you’re no longer with Western Union, what’s next for you? The whole market’s waiting to hear.
[00:25:04] Rob: I’d have to say, after 30 years it has been quite nice to have a few months off to do a few jobs around the house and get out with the dog regularly. But I’d like to find something that I can use my experience in.
As I said before, I’m a real believer in empowering people to understand from a customer’s point of view, for them to understand what exactly their needs are and how that works. I’m also a big proponent of the coaching and mentoring internally within a company, and helping the whole team. During my time in Western Union, it wasn’t so much about my team. My team knew exactly what they were doing. But often it was helping a sales team that was changing; there’s a lot of turnover staff, you bring new people in, and spending time with them, coaching them, working with the middle and back office so they really understand the purpose of their role, and as we brought new products on making sure they also understood what that product was, why that customer was buying that, and making sure everybody was putting in the same direction within the company.
I’m looking for an opportunity, waiting to see what that looks like in the real world. In the meantime, while waiting for that to happen, I’m learning to play base guitar. It’s a lot more difficult than I expected!
[00:26:40] Pritesh: Well, Rob, it’s been a real pleasure to have you on the podcast this week. Thanks for your time. Is there anything else you’d like to share with the audience today before you head off.
[00:26:52] Rob: Not really. As I said, I’m here and available if anybody needs me.
[00:26:58] Pritesh: I’m sure there’ll be about 90 emails. I think half the market doesn’t know you’re available. When they do, you’ll be getting all the recruiters.
[00:27:11] Rob: But I think anything, really. If anybody needs any help and just wants to talk over something, I’m on LinkedIn. My details are there. Just do get in touch, I’m happy to help anybody that is either starting out in this market or wants to know how they’re going to progress their career in a different direction. If anything like that comes along, please feel free to get in touch. I wish everybody out there the best of luck. Hope we all stay COVID-free for Christmas.
[00:27:45] Pritesh: Cheers, Rob. Thank you, very nice ending. Appreciate it. Have a good one! Bye-bye.
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