Currency brokers specialise in doing one thing, foreign exchange as opposed to high street banks that provide a wide range of services. As such foreign exchange is an extra for most high street banks, legacy systems and added layers of compliance and bureaucracy mean banks have to charge more to make it worthwhile.
Therefore currency brokers are now one of the most cost-effective choice for large foreign exchange transactions and international money transfers.
Here are 6 things to look at when choosing a currency broker:
There is a plethora of currency brokers in the UK and they all essentially do the same thing. That is provide access to better exchange rates and faster international money transfers than banks.
So how do you choose between them?
Here are six things to compare:
1) Check they are FCA registered
All financial service businesses in the UK have to be regulated by the FCA and currency brokers are no different. You can check to see if a currency broker is regulated on the FCA register here.
Being regulated by the FCA means that the broker has been vetted and adheres to certain compliance and client fund safety rules.
Never open a currency brokerage account (or any other financial services account) with a firm that is not FCA registered.
2) What will the service be like?
Personal service from a currency broker is really one of the most important factors. Some may say even more so than pricing.
Large foreign exchange transactions can seem very daunting and as a client you need to make sure that the firm has experienced dealers who understand the process and markets.
It’s obvious that every transaction is very important and that in some cases such as foreign property purchases can be the largest single transaction for an individual.
Therefore, having someone to talk to directly, before a large foreign exchange trade is helpful and one thing that currency brokers are particulary good at.
After all, not correctly timing and executing a foreign exchange transaction is arguably the largest costs.
3) Compare exchange rates
Currency brokers are far cheaper than banks for foreign exchange and international money transfers. A bank can charge an exchange rate mark up of up to 5%, while most established currency brokers aim to charge up to 1%.
However, most currency brokers only display exchange rates on their website rather than the mark-up. So we’ve put together this guide on how to compare exchange rates.
There should also be no additional fees for conversions as everything is included in the exchange rate. To request quotes from multiple currency brokers click here.
4) Do they offer currency forwards?
Most banks don’t offer currency forwards and they are perhaps the easiest way to reduce risk and protect your money in the foreign exchange markets.
Using a currency broker for a currency forward means you can lock in the current rate for up to one year in advance. You will need to put down a small deposit, but some currencies can move up to 10% a year so locking in an exchange rate is a very effective way of budgeting.
5) Check how long transfers take
Banks can take a few days, whereas most currency brokers can transfer funds internationally on the same day.
So if you do a conversion in the morning a currency broker can sent the money and have it in your international beneficiaries account that afternoon.
Sometimes, this can take a little longer due to the procedures of the receiving bank and country, they generally aim to get funds sent from our account as soon as possible.
6) Can you convert and send funds online?
Some customers, especially corporate foreign exchange clients are quite happy to convert and transfer currency online. So make sure that your broker can provide you with an online platform for desktop and on mobile so you can check exchange rates, execute conversions and track payments wherever you are 24/7.
Finally, why use a currency broker?
Here’s why currency brokers are better than high street banks…
- It’s cheaper
- It’s quicker
- It ‘s easier
But most of all it’s the most cost effective way to manage your foreign exchange. No matter whether you are moving abroad, buying a villa in the sun, paying overseas salaries or importing/exporting goods on a regular basis using a currency broker should save you a significant amount of money versus your traditional high street bank.
Watch our video on what to look for when choosing a currency broker
This interview was recorded on 13th August 2019 with Mark Phipps from Linear International Payments
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