Kim Fournais is not a fan of online brokerage Robinhood. The financial veteran and founder of Saxo Bank strongly believes that they’re creating a poor reputation for the industry. “If you lure people into trading excessively because you tell them something untrue, that’s not okay. It’s not about the smart cheating the less smart. That will not create long term win-win situations and sheds a terrible light on the industry,” he says.
Fournais, 56, is adamant on being part of the solution, not the problem. He prefers to build a long-term and sustainable business instead of one that expands exponentially before exploding spectacularly a few years down the road. It’s one reason why Saxo Bank has continued growing.
Founded on 15 September 1992 in Denmark, the origin story of the investment bank and online trading platform has become financial lore. Fournais and his business partner cobbled together €77,000 ($117,000) to start the company. Their first client: the real estate agent who leased their office space to them.
Today, Saxo Bank has “about $130 billion in client deposits” and employs over 2,500 people across the globe, with a presence in financial hubs such as London, Paris, Dubai and Singapore. The vision remains the same — enabling people to fulfil their financial aspirations and make informed decisions.
That’s why Fournais has such powerful feelings about the payment for order flow (PFOF) practice that free brokerages like Robinhood employ. In a nutshell, when you put in an order for a stock, your broker routes it to a market maker who is paying your broker for that information and order. This creates a conflict of interest because your broker is incentivised to work for the benefit of the market maker instead of you.
I think it’s time to start a discussion of what the core meaning of money and financial systems really is, and how we want to use their potential in the best way.
Kim Fournais
Regulators are already cracking down on this practice; the Australian and European commissions have imposed restrictions or banned it. As Fournais says, there’s no such thing as a free lunch. “They’re not actually democratising investing,” he adds.
But Fournais emphasises that he still believes in capitalism.
“Money is not the root of all evil. It’s just a means of exchange, a store of value and a tool to create win-win transactions. It needs to be treated with respect,” he says.
However, he believes that society has to rethink its approach to capitalism.
“We are living in a world with an onerous debt burden, thanks to the biggest monetary experiment in our history — pumping out money at negative interest rates. Now, this has led to massive inequality. The growth of wealth is for people who invested, but at the expense of people who saved money. If you work hard and put your money in a bank account, you get punished. On the flipside, we inordinately reward those who take on a lot of debt and invest in risky assets. I think that’s bad and I fully understand why some people might think the system is rigged against them,” adds Fournais.
His solution: “more common sense”, and rational or humanistic capitalism that is powered by increased productivity, not debt.
Communism, he jokes, doesn’t exactly have a long string of success stories anyway.
The growth of Saxo Bank reflects this ethos. In 1998 — nine years before the late Steve Jobs unveiled the first iPhone — the bank went fully digital, allowing its customers to trade online. As Fournais wryly remarks, the company became fintech before fintech became a thing.
It has slowly added more functionalities and expanded into other markets over the decades. Fournais is proud that Saxo Bank is the only platform that allows a client to trade during any macroeconomic cycle in all the global asset classes.
In the future, the bank’s clients can expect even more innovations, including more advanced artificial intelligence and big data analytics, to help them make better decisions, not just in the market, but in their lives as well. Home downpayments or children’s university fees are major financial milestones, and Fournais shares that the bank wants to be a part of that journey by “making sure you’re on target for your goal”.
On a broader scale, it recently released a finance education series. Comprising five animated films that delve into controversial topics, such as whether money is the root of all evil, Money Matters – Make Your Impact is Saxo’s vehicle to prompt a rethink of the financial system.
“We can’t change the financial industry in our own right, let alone the perception of it. And we can’t erase evil. But I think it’s time to start a discussion of what the core meaning of money and financial systems really is, and how we want to use their potential in the best way. It is this potential I want to invite everyone to reflect on. But it requires that we tackle some of the false truths out there. It requires that we ask ourselves what kind of wealth we want and then to take a stance on how it should be created,” Fournais says.
It might be a small step, but every journey begins the same way. After all, Fournais is a shining example of what one can achieve with persistence, grit and a dash of common sense. When you move out of your comfort zone, you can only grow, just like how a 26-year-old engineer by training took the leap and started an investment company 30 years ago.