Interview with Egbert Pronk – CRO at BUX

For the Dutch version, click here!

Egbert Pronk is co-founder of BUX, Europe’s fastest growing neo-broker. After 7 years in the role of CFO, he recently handed over the torch to Mark Lamers, and now occupies the position of CRO. In this interview Egbert talks about his career path, the switch from CFO to CRO, and the growth of BUX and the challenges it brings.

What/where did you study and why? Are there choices you made in your student life that have had a big impact on your career path so far?

After secondary school, I went to Nyenrode to study for a Bachelor in Business Administration (BBA). The choice to study at Nyenrode was primarily based on the fact that I was quite competitive and I was curious whether I would pass the entrance test. In itself that is a rather unusual reason to make that decision, but it did play a role. I also liked the fact that you were based at the college, that there was a lot of sport and that it was practice-oriented. It was also well regarded at the time. The BBA was very broad, with a large number of courses where you learned the basics of many subjects. There was no real possibility of deepening or specialising in certain directions. You only had a few electives so it is not so much that the choices I made there have had a major impact on my career path. During the BBA, I took International Monetary Economics, which I found very interesting. This did lead to the fact that later, when I went to apply for a job, it became clear that a job as a market maker or trader on the options exchange was something I would probably enjoy.

Prior to your role as CFO of BUX, your experience included being a trader, partner at a market maker, and CFO at a food manufacturer. How did you end up joining BUX and did these work experiences give you the right skillset to fill the role as CFO, or did you have to grow into the role?

After my studies I started working for a market maker on the options exchange in Amsterdam. In the beginning, just as a trader. I was relatively quickly given team responsibility, after which I started managing the Amsterdam branch with two colleagues at a certain point. So I quickly gained management experience, not only in managing people, but also in other aspects such as HR and administration. Later, I also became a director, so then you also have formal responsibilities, also towards the supervisor. In that respect, I was lucky that in the company where I started working, the opportunity arose at a relatively young age and roles became available. Later, after we were taken over by Van der Moolen, it became a much larger organisation. That’s when I started focusing more on managing teams, focusing on both options and equity trading. After 16 years in finance, I switched to another field when the opportunity arose to help a friend with a business in organic food production. He is very creative and especially good at marketing and sales and I made sure that the financial administration and contracts were also in order. I particularly enjoyed doing something in a totally different business.

After two years, however, I started feeling the urge to do something in the financial world again. A common thread throughout my career is actually that I have never worked for corporate companies but always for companies where you had to do it yourself. Where there was no company surrounding you in which everything was arranged. At BUX it went the same way. We started with three, when there was nothing, and now we employ 190 people. Did I have to grow into that role? Yes, I have learned a lot, but that is always the case. It is only natural in entrepreneurship that you always have to learn new things. Over the years, the organisation grows and so you grow along with it. What you do notice is that as the organisation grows, at a certain point you have to come to the conclusion that you can no longer do everything yourself. You do not have the time for it, nor the specialist knowledge.

 What does an average day as CFO of BUX look like?

At the moment I am transitioning my position as CFO and after the transition I will take on the position of Chief Risk Officer (CRO). But generally speaking, there is no such thing as an average day. Although at a certain point you do get into a weekly rhythm of recurring meetings now that the organisation has grown so much. At the moment, there is a lot of emphasis on the transfer of tasks to the new CFO. But in general, an average day also differs per period. So when you are fundraising, you spend 50 to 60 percent of your week doing that. At other times there are other subjects that require a lot of attention and time. But it is very diverse.

The switch from CFO to CRO is not really a switch, but more of a focus. Because as CFO, I was responsible for finance, HR, legal, risk, and compliance. Due to the growth of the organisation, the workload, and the speed at which things have to be done, we came to the conclusion that we needed to take on people in the roles of head of people (HR), and someone in the CFO role who would focus purely on finance and funding. That will be Mark Lamers, who comes from ABN Amro and has a lot of experience in financial markets, and is also a chartered accountant. In my new role, I will therefore focus on Legal, Risk, and Compliance, which were also my responsibilities before.

What are the risks within a neo-broker that the CRO focuses on?

You obviously have a number of operational risks for a broker, the most important of which is that the service to your client must be available at all times. So the biggest focus is making sure your platforms, customer support, and your connectivity to the exchanges are up and running at all times. Another important aspect is of course compliance. You operate in a regulated environment, so you must ensure that you are aware of the laws and regulations. Subsequently, products and services must be constructed in such a way that they comply with them. Besides compliance by design, you must also monitor whether your products still comply with the legislation and regulations in practice.

Are you an active investor yourself?

Yes, I am an active investor. I invest for the long term, so simply periodically investing a fixed amount in a well-diversified portfolio. So I just invest periodically, without any opinion, whether the stock market is high or low. I am also an active investor in the short term. So if I think the stock market is too high, or if I think, for example, that the AEX has risen too fast in comparison with the DAX, then I also trade in the short-term.

As far as I am concerned, you can approach the financial market from two objectives. One is for long-term capital growth, for which you just have to put in money periodically. At the same time, that is also quite boring, since you can do little with your opinion. So the other objective is that you do want to do something with your opinion or idea, because you may have an opinion about the oil price, or the Shell share, for example. If you take on short-term positions, then you suddenly start reading the paper in a different way. I like to do that too, and it is a kind of hobby. Of course, you want to do the short-term trading as well as possible, but whether you earn very much with it (compared to a buy-and-hold strategy) is not the most important thing.

“A lot of financial providers seem to try their best to make the product they offer as complicated as possible so that the customer does not understand it. We at BUX find that much more damaging than the risk itself.”

In 2020 and 2021, more and more people started investing, mainly young adults. According to the AFM, these young (inexperienced) investors take substantially more risks compared to traditional investors. How does BUX deal with this?

This actually corresponds to the idea that there are two different angles to approach investing, one of which is long-term capital growth. We are currently developing more and more functionality in the BUX-zero app aimed at long-term capital growth.  One example is the creation of an investment plan with which the user automatically invests in a number of selected ETFs every month. In the other perspective, investing based on your opinion, risk plays an important role. Many people say that risk is inherently bad, but we at BUX do not necessarily agree. Risk in itself is not bad, as long as people have a way of understanding and assessing the magnitude of the risk. What BUX tries to do is take the complexity out of investing so that people understand the risk. One way we do this is by focusing on education. We produce several educational videos, have a knowledge centre on our website and share jargon-free weekly stock market news so that novice investors can learn about all aspects of investing. A lot of financial providers seem to try their best to make the product they offer as complicated as possible so that the customer does not understand it. We at BUX find that much more damaging than the risk itself.

In a previous interview, Nick Bortot called BUX the European Robinhood. So is the revenue model of BUX, comparable to other neo-brokers, based on payment-for-order-flow?

No, that is not the case. In the Netherlands, payment-for-order-flow is not allowed. As regulated broker, we are not allowed to receive money from exchanges or liquidity providers for sending our orders to those parties. In principle, this is not allowed in the whole of Europe because of the European-wide MIFID II legislation that is supervised by the European Securities and Markets Authority (ESMA). However, in Germany, there is a slightly different interpretation of this, which means that payment-for-order-flow is currently allowed there under certain conditions. So there are a number of German brokers who do receive payment-for-order-flow from counterparties to whom they send client orders.

Payment-for-order-flow is a complicated and complex subject, but from BUX’s perspective, we are not necessarily against payment-for-order-flow under two conditions. Firstly, we think it is important that there is a level playing field in Europe.  So what is not allowed in the Netherlands should not be allowed in Germany or France either. Secondly, we think that payment-for-order-flow should be permitted under certain conditions when the execution of the order and the fee that the broker receives benefit the retail client. To put it another way, if the client is no worse off, or perhaps even better off, because the broker receives payment-for-order-flow, then it may not be wrong. However, it is complicated to objectively measure and ensure that the customer is not worse off.

What is your opinion on the increasing amount of off-exchange trades being carried out and the effect of this on transparency?

In Europe, MIFID II has been in force since 2018, a European-wide regulation, which has as an objective to increase transparency and have as many trades as possible take place on-exchange. In the past, you had so-called dark pools, where client orders were sent to and you did not know exactly what the price was or who your counterparty was. MIFID II has actually restricted all of that in Europe. Thus, an important pillar of MIFID II is transparency. Of course, we at BUX support transparency, as it also has to do with ensuring that clients do not get an order executed at a price that is unfavorable to them. That, in turn, is a danger of payment-for-order flow; that a broker will execute a client order at a price that is not favorable for the client, but for which he receives the highest fee. To avoid this, transparency is very important. But transparency certainly does not have to be achieved only by executing all transactions on-exchange. The problem with the national exchanges (Euronext, Xetra) is that they are expensive. If we want to execute a client order on Euronext, we pay at least 75 cents per order to the exchange. Whereas if we execute it on another exchange, with the same transparency and perhaps even better prices for the customer, we pay zero. As a result, we also have to charge the customer zero. So we are in favor of transparency, but that transparency can certainly not only be achieved by performing everything on the exchange.

3 years ago, we interviewed Nick Bortot about the growth strategy of BUX in which he answered that the focus was on the rollout of a stocks app, a crypto app, and the rollout in new countries. To what extent has your current growth strategy changed since 2018?

At the moment, our growth strategy is pretty much the same as in 2018. We have launched the stock app and it is also our flagship product. In the future, we will continue to improve and expand the features in the shares app to make the platform even broader and better. We have also set up a crypto app in the meantime, in cooperation with a party that was already active as a crypto broker.  In addition, we are still very busy with the rollout in Europe. Last month, we went live in Ireland. The next country to go live is Spain, followed by Italy later this year. We are rolling out these countries one by one, because we strongly believe that you have to localise as much as possible. You really have to spend time and effort in each country to create a familiar and trusted experience.