Nick Jones offers 10 top tips to make sure that you get the best rates when it comes to transferring money to France
It’s been a volatile year, to say the least, and the fluctuations in the world’s markets are not likely to become any more stable in the short term. Anyone involved in moving money between countries will need to keep their eye closely focused on the exchange rates in the months ahead, or look up one of the few companies who are in the rare position to be able to help individuals control their levels of risk.
As if there isn’t enough to worry about when you’re moving abroad, or buying overseas, fluctuations in currency rates can make a huge difference to the amount of money you end up with. Buying and selling property overseas almost always involves transferring large amounts of money from one currency to another and moves in the market can make up as much as 10% difference over the course of just a few days.
It’s worth bearing in mind that this kind of movement will not only mean that the costs of your move or purchase could be affected drastically by this kind of market activity, but in the worse possible scenario it could also put the house of your dreams financially out of reach.
Fortunately, there are now ways of protecting against this kind of outcome and ensuring that you know exactly what you’re dealing with by minimising your risk in advance.
“Some foreign exchange brokers claim to offer the best rates on currency transfers, claiming they provide protection, but clients often find themselves locked into an exchange rate that does not allow them to benefit if that rate subsequently improves,” explains Elisabeth Dobson, head of private clients at foreign exchange company, World First.
“We can find the very best spot rates (that is the rate to transfer your funds immediately) or we can secure or fix your exchange rate by using what’s known as a forward contract.”
An efficient exchange
By using an FSA-authorised foreign exchange company, you can set a rate now for a transaction happening up to three years in the future so there are no nasty surprises on the day you buy your dream home abroad. Whether you’re buying property overseas to retire, or want an overseas investment property, a foreign exchange company can make sure the international money transfer happens in the most efficient way possible.
“We can transfer your money from your bank account at home to your overseas account and we can convert from and to virtually any currency,” confirms Elisabeth. “And if you’re selling, we can bring your money home quickly and safely – using our own overseas accounts if appropriate.”
Employing a specialist foreign exchange company is becoming increasingly popular and expats are reporting significant savings. Anyone who is involved in making a substantial overseas money transfer of any kind would be advised to look into their options before making the payment; the savings could be substantial.
10 top tips to help you navigate the currency markets effectively.
1 Sort out the pricing and then set the budget. Look ahead at the known costs and ensure that these costs are covered. Fix these costs in sterling using forward contracts or currency options at the time of setting the budget.
2 Consider using forward contracts or currency options to build in flexibility. If you don’t like the idea of buying all your currency on the day, at what’s called the ‘spot rate’, secure some rates in advance with forward contracts or currency options.
3 Be realistic with rates. Formulate a worst-case scenario to budget against. It is advisable to set your budget 2-5% below where the exchange rate is currently trading to allow some room for movements that are not in your favour.
4 Research views from a few different sources to make an informed decision about expected foreign exchange rates. There is no cost to sign up for regular updates from foreign exchange specialists.
5 Don’t hang your budget off comments in the press. Remember that a wild statement about which way a rate is going gets media coverage. Small rate movements don’t make stories.
6 Simple solutions are not always the best. Instead of simply fixing future payments at a forward rate, use hedging strategies (i.e. currency options) that are tailored to fit your exposure, currency forecast and risk level. This will enable you to protect yourself from adverse rate movements while still benefiting from favourable rate movements. There are experts to assist. An independent foreign exchange broker is like a tailor working to get the perfect fit versus the off-the-shelf product.
7 Assess your exposure to risk with the help of an expert. Different foreign exchange transactions carry different levels of risk and you need to be clear on what implications rate moves will have. Discuss the situation with an FSA authorised broker to help you assess the situation.
8 Sometimes the best hedge is the one that’s best for cash flow, not just for predicted rate moves. A good foreign exchange provider should take all of your needs into account when assessing which approach to recommend. Any hedging strategies must fit in with your day-to-day cash flow requirements.
9 Mix and match. Don’t be afraid to use a variety of products in place for various payments. Different products may suit different situations, and diversification can help spread risk.
10 Assess your foreign exchange provider. As you would for any other business, before entering into an agreement carry out due diligence on your foreign exchange provider. Are they FSA authorised? What is their balance sheet like? Get references from clients that deal with them.
Nick Jones, World First foreign exchange