The summer is here and thoughts begin to turn towards holidays. Many people use their holiday as a chance to reflect on their future, perhaps browsing the local estate agents and casting an eye on some rather nice villas. So I thought that you might be interested to know that your foreign currency requirements don’t have to be met just by your regular bank, indeed they are often the most expensive option.
I was recently approached by a global payments specialist firm called AFEX (www.afex.com) who were keen to talk to me about any of my clients who made regular or one-off international transactions; either privately or as part of their company’s activities. During the course of the discussions and our face-to-face meeting I was given a run down on the need for clients to properly plan for and manage these transactions to avoid needlessly wasting money. The services and benefits they could provide fell into three broad categories:
IMPROVED RATES AND CHARGES
Almost every bank will charge around £25 per transaction you make in an upfront fee. AFEX only charge £3 and even then only on transactions under £5,000. However, most of the costs and charges associated with making international transactions through your bank are hidden in the terrible rates of exchange they offer clients. The difference between the ‘interbank’ rate (which is the rate banks and firms like AFEX buy currency at) and the rate at which they sell it to you is called ‘the spread’. This is essentially the profit margin they make on your transaction. Banks normally take about 3%-4% profit margin whereas AFEX typically take under 1% – how much under depends on the amount you’re sending.
MARKET GUIDANCE
Advice can be crucial, unlike your bank, most foreign exchange firms will provide your very own dedicated account manager who will be able to give you guidance on where they see the market heading. In the case of AFEX they draw on all of the firm’s 35 years of operating experience and knowledge to ensure you trade at the right time, not just the right price. You’ll have your account managers direct dial phone number so there will be no more switch boards, automated messages or account numbers. As he or she gets to know you and the type of transactions you do better they will also be able to pro-actively advise you on when a good time to trade will be. This typically saves another 2-3%.
HEDGING AND RISK MANAGEMENT TOOLS
AFEX can offer you free to use tools to take the volatility and unpredictability out of your transactions. Simple tools like forward contracts lock in rates when they’re in your favour and you can trade up to 12 months into the future. Ensuring that the dream home you want overseas remains affordable regardless of what happens in the currency markets.
Remember, this is not advice, I’m merely drawing your attention to the fact that as an independent financial adviser we have access to the entire market, providing solutions to financial problems that are often not first thought of when you think “IFA”… which is far more than pensions and investments. You will be familiar with the phrase, “its not what you know, but who you know”. For a leading “plugged-in” IFA firm, we have the connections to make life considerably better.
Dominic Thomas: Solomons IFA