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I’ve said it time and time again, that the most important thing when doing large currency conversions is trade execution.
There is a lot of noise at the moment about discounted FX rates, peer2peer currency transfers, and banks being evil because they take a large mark up on foreign exchange transfers. But the truth is that one of the largest hidden costs when it comes to foreign exchange conversions is marketing timing.
What I mean here is that a currency pair like GBPUSD can move around 3-5% in a month. So spending that month haggling brokers to reduce your exchange rates down from 0.5% to 0.3% isn’t actually worth it because the underlying exchange rate may have moved more than that anyway. You’re better off finding a broker, that is transparent with rates and agreeing on a fixed mark up to begin with.
So, when and how you do a transaction can have a huge impact on how much foreign currency you send or receive. Yes, there are some money transfer services that offer almost zero markups and fees, but you get what you pay for. Using an app or online only service to transfer money may get you the best conversion rate, but what you miss out on is advice on when and how to do that conversion.
Here we talk to Mark Phipps, from Linear International Payments about the importance of market timing and why you should use a currency broker.
Full disclosure, I recently migrated my own currency transfer service (Berry FX) to Linear International Payments.
First off, what do you do, who do you do it for and why do you do it?
I am a Partner at Linear International Payments, a deliverable FX trading platform that is backed by Linear Investments. Linear are FCA regulated and offer a full suite of services including agency execution, prime brokerage, custody & clearing services, outsourced middle & back office services and capital introductions as well as an investment management platform.
I have worked in the FX space for over 15 years now and still get great satisfaction from it. I enjoy keeping my finger on the pulse with what’s going on in with the economy and around the world. I also have a number of long-lasting relationships that I have built up and worked with over time and I enjoy the interaction with those people.
When it comes to money transfers there are literately thousands of services now. These range from digital banks offering discounted exchange rates, peer-2-peer providers and specialist firms like yours.
What would you say is the standalone reason why anyone would come to Linear as opposed to the competition?
I would say the main thing is our experience, the service we provide and our willingness to do business.
We take a consultative approach.
A lot of companies in the industry seem to employee brokers of the younger generation who don’t have the experience to advise on the FX markets and add real value when it comes to helping on the timing of trade execution.
Many of our competitors seem to try and push clients into trades using pressure and fear, whereas we really do take a consultative approach, wanting to achieve the best possible price for our client in the time frame they have available to purchase the currency.
All of our team are experienced in this space and having helped many clients we really know what is important in order to give the client piece of mind when making payments.
If you could give one bit of advice to anyone needing to do a large currency transfer. What would it be?
A lot of people focus on how many pips they are getting from the market, but I think the most important thing is the timing of the trade execution.
The markets are very volatile, particularly with recent Brexit developments, so it is imperative that you adopt the right strategy to ensure you execute the trade at the right time.
Strategy of the trade is important as well. Another option would be to split a payment up and work on an average price over the time you have to purchase the full amount. This tends to give you a better blended price come the end of the contract and eliminates some of the risk.
Through all your years in the industry. What would you say is the biggest mistake individuals and businesses make with their international payments strategy?
One of the biggest mistakes is lethargy.
I think it is important to keep your provider on their toes and ensure you are getting a good but fair deal. If you aren’t, then it’s time to look elsewhere in the market. We are always happy to talk to new customers.
I have also seen competitors offer clients what we call in the industry ‘honeymoon prices’. These are prices that make no money for the FX provider and are not sustainable, but hook the client in using early deals. The prices do not stay this good and invariably the client finds themselves with a worse deal than they had originally. We are a business and need to make money on the payments, which is why I am always as transparent as possible with our clients to ensure consistency.
And finally, what would be your top online resource that you could recommend to business who want to learn more about being prepared for a large money transfer?
It’s fairly mainstream, but Fxstreet.com is a good source of information and knowledge for me. It’s one of my first reads in the morning to get a feel for potential market movements that may affect the market that day or week.
It’s also a good idea to keep an eye on the economic calendar to see what data is coming out over the course of the week that may affect the prices. This can give you a good opportunity to buy on spikes or catch prices before the drop too far.
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Richard founded the Good Money Guide (previously Good Broker Guide) in 2015 and has been a broker for 20 years most recently at Investors Intelligence and previously a multi-asset derivatives broker at MF Global (Man Financial). Richard started his career working as a private client stockbroker at Walker Crips and Phillip Securities (now King and Shaxson) after interning on the NYMEX oil trading floor in New York and London IPE in 2001 & 2000.