Undertaking a major change in its leaders' compensation model, ZuluTrade has announced that it will drop the profit-sharing fees from the followers’ accounts. The radical change in the compensation model comes in line with the new management approach to make ZuluTrade more investor-friendly and forward-looking by reducing costs and increasing quality and transparency on the platform.
ZuluTrade’s current profit-sharing model pays traders (a.k.a. leaders) who provide signals that are copied automatically into the follower’s account. The follower pays $30 as a subscription fee per month per account and pays the leader 25% of the profits gained in his account in a month. As such, the higher the profits on a follower’s account, the higher the leader’s compensation. The 25% Performance Fee is paid only for the months closed with profits.
However, on the flip side, if the follower’s account suffers a loss in the following months, the leader is not charged for the loss incurred. This implies that the followers are putting money on a leader and sharing their rewards, but they are not really sharing the risk in the long term with the leader. Also, this means that the long-term impact of the client’s performance can be significant due to added costs of profit sharing.
Thus, the popular psychology behind the profit-sharing model claiming that you pay only when you earn profit looks good only on paper. Another challenge that the followers face is when they have more than one account or more than one leader that they are following.
Assume a follower follows two leaders where one leader makes money while the other loses money wherein a cumulative aggregate P&L stands negative. In this case, the follower will share a portion of their gains with the winning strategy leader and incur no fees for the loss accrued on the losing strategy. Again, this does not justify a fair scenario for the follower.
Taking all these scenarios into consideration, ZuluTrade is set to make significant changes in how followers are charged. The company will drop the profit-sharing fees from the follower’s account as of 1st January 2023 and effective immediately no one will be able to open a new profit-sharing account. ZuluTrade will also drop the $30 subscription fees being charged to profit-sharing accounts and make it Zero.
Tajinder Virk, CEO at ZuluTrade, said: “Finvasia is known to create a value-driven system and has revolutionised the Zero-commission ecosystem. This move further cements Finvasia’s efforts in pioneering “Zero commission” business models. We are working towards creating a platform that is democratic, peer-to-peer, transparent and ethical. Everything will be right there for people to analyse and make informed decisions.”
Adding to the comments, Sarvjeet Virk, Co-Founder of Finvasia Group, said: “We are happy with the direction that ZuluTrade is evolving towards, and I see significant changes coming in the months ahead that will put our investors at the centre of our product.”
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