About the Firm: How did you get started? Do you provide additional services besides brokerage?
We originally started as a small IB in Minnesota which wanted to expand into Iowa. I was hired to start the Iowa office. In the beginning it was all cold calling, all the time. It was very hard work, but after a tough first couple years it started to pay off. Our primary business today is cash grain and livestock marketing consulting. We use brokerage to assist us with achieving the risk management and pricing goals of our clients.
What are the biggest challenges your clients face today, and how do you help them?
The extremely volatile price action in the last several years has really increased risk for the ag producers we work with. Costs are skyrocketing along with output values. We help clients by trying to make the complexity of the various market factors that affect price easier to understand. We get to know our customers well so that we know which kinds of strategies add to their stress level and avoid those, while helping them achieve their goals with other, less stressful strategies.
How has the futures and options industry evolved since you first started in business? Has hedging changing?
In the early days it was hard to get information on a timely basis. Today the widespread use of the Internet provides more information than can be processed. So now our job often becomes filtering the vast quantities of information to help our clients understand which information is really meaningful, and which is just clutter.
Hedging is getting more difficult as price swings become more violent. We’ve always used options. While many argue that option premiums are too expensive to purchase, we’ve found that often a futures position (specifically margin stress) has a detrimental effect on our customers’ mindsets and alters future marketing decisions. We stress that they should use good business practices, not price prediction. We’ve never been able to predict prices consistently, anyway.
What do you believe to be the keys to your success?
When you really care about your customer’s success, it shows. They appreciate that and reward us with their business. We try to take a long term approach with our customers and the internal operations of the business. We’ve actually downsized the business over the last 10 years and have focused on fewer, higher quality clients, and better quality of life for the staff.
What trends are you most excited about/worried about?
We worry about some of the OTC contracts which don’t always have the same disclosures and “know your customer” standards that we practice as IB’s. As we’ve seen recently, if risks aren’t properly illustrated, the results can be devastating, especially for an uninformed customer. We are concerned that a few blowups would harm the reputation of the whole industry.
Why did you become a member of the NIBA?
I joined NIBA immediately after purchasing the business from the previous owner. Especially in those early days I really benefitted from the experience of other IB’s. More than anything it was a confidence booster that I knew people that I could call when I was in over my head. I think the advocacy that NIBA provides is extremely valuable.
Contact Steve Reece @ steve@sciota-trading.com
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