Security:
When it comes to personal money transfers security of funds should always be the first and most important consideration, however there is often confusion around the differences in security between a bank and a specialist provider. This can lead to individuals using their bank unnecessarily, in the belief that it is safer, yet at a significantly higher and very avoidable cost. The confusion often arises around the Financial Services Compensation Scheme (FSCS) a scheme designed to protect funds held on deposit at a bank up to the value of £85,000. This scheme applies to banks but not to specialist providers such as Cornerstone FX, not because specialist providers are less secure, but simply because they operate in a different way and therefore the FSCS is not applicable to the way they operate. Generally speaking, funds are not held by a specialist for any meaningful length of time, rather they are generally just ‘passing through’, whereas an individual may leave funds sitting with a bank for years on end and thus the need for a scheme to protect them in such a scenario. This does not in anyway mean your funds are less secure with a specialist provider, on the contrary they could be considered as more secure. Due to the inherently different nature of holding funds on deposit with a bank compared to using a specialist provider to make an international currency transfer, consumer funds are protected in a way that is relevant to the nature of that type of transaction. When using a specialist provider regulated by the FCA, all client funds are held in segregated client accounts with tier one banks, ring fenced from the providers own funds and accounts at all times. This means that if the specialist provider ran into difficulties, client money would be fully protected and safeguarded in these accounts regardless of the volume. This is because specialist providers are regulated in a way that is most applicable to how consumers use them and with that in mind, to protect consumers in the most appropriate way. If the FSCS applied to specialist currency providers instead, then the funds of somebody making a large transfer for something like an overseas holiday home would in fact be less secure. Instead of having all of their funds ring fenced and safeguarded in segregated accounts, they would only have protection on £85,000 of them. As long as you use a specialist provider who is regulated by the FCA your funds will be protected in the best and most appropriate way. Applying the FSCS to funds transacted with a specialist currency provider would be a bit like applying the highway code to the Monaco Grand Prix, the rules would not be applicable or relevant to the event.
Cost:
The one thing you can guarantee when it comes to using a bank for a personal international transfer is that it will be very expensive. Not only will you pay a transfer fee, but you will achieve a very poor exchange rate several cents below the interbank rate. Some banks even set a daily rate, ensuring even poorer value for their customers. The service will also be exceptionally poor and for somebody looking to make a large transfer, this could cost them even more than the poor exchange rate will. For anybody with time on their hands to make an international transfer, the services of a specialist provider can help them extract maximum value from their transfer beyond just achieving a better like for like rate. When it comes to using a specialist there are a few things to consider. If your transfer is relatively small, you are not worried about speaking to somebody, or about the timing of your transfer, then one of the fintech providers like Tranfserwise or Revolut may suit your needs. They offer intuitive apps and competitive exchange rates normally expressed as charge which is normally a percentage of the transaction value. If, however your transfer is larger in nature and you have time in which to make it then it is likely a specialist provider will better suit your needs. When it comes to using a specialist provider, they should all be cheaper than a bank and a good price should be a given, however there can still be some large variances from one provider to another. Most brokers pay significant sums to acquire clients through various different channels, you only need to type “international transfer” into google and see how many adds appear. Companies compete for clicks based on search words and the most popular searches cost the most. Whilst using a broker should be cheaper than a bank, there are still costs for them to cover and having paid to obtain them, private clients are often seen as a way to maximise revenue for a broker compared to their corporate clients. This is why it is always wise to make a few comparisons; rather than just rely on the fact you must be getting good deal from a broker. Try to confirm your actual margin if you can, rather than just assuming it must be good. At Cornerstone FX we rely only on referrals and word of mouth to acquire private clients, so they do not have to cover the significant marketing and advertising budgets of some brokers within their transactions. This enables us to turn the myth of private individuals not getting rates that are as attractive as corporate clients on its head.
Service:
Much like price, service should be a given when it comes to using a specialist currency provider, however there are still a number of differences and considerations. If your requirements are more transactional, then this is less of a consideration, however you still want to make sure you can speak to somebody if you have a question and that the person you speak to will be knowledgeable enough to answer it correctly. Some larger brokers often have wait times when calling up, or you may overflow to somebody who cannot answer your question. Sometimes if support is email based, response times may be up to several hours, so even if your requirements are more transactional in nature you still want to make sure you choose a provider with good lines of communication. When the nature of your transfer is less transactional then there are a number of further considerations. Do you have a dedicated point of contact? Are they easy to reach and responsive to questions? What hours do they work? Do they support you with relevant information? How many other clients do they have? The last point is important because if your point of contact has too many clients to look after this may compromise the service they can offer, especially at times when exchange rates are moving a lot. Most of all, the key consideration is are they acting in my best interests? Again, this is something that should be a given, however there can be a high degree of variance from one broker to the next. Let’s take the scenario of a private individual purchasing an overseas property in Spain, with three months until they sign at the Notary. Your dedicated point of contact should take the time to fully understand your budget, your attitude to risk and the impact of certain exchange rate scenarios on your property purchase. Should you secure your rate immediately? Should you wait? Should you secure some of your currency and wait on the rest? This is not something for your broker to decide for you, rather it is something for them to help you decide by asking the right questions and fully understanding your situation. This is really only something that you can get a feel for upon speaking to a few providers, are they just reeling off a load of options to me, or are they taking the time to fully understand my situation? Are they using lots of ‘market talk’ to get me to trade and does that seem like the right decision for me, or for them?
Technology:
An online platform should really be a given to compliment your dedicated point of contact with any currency broker. For those who prefer to manage things almost exclusively on the phone, it can still be a useful means to track payments and to provide easy access to historical transactions and to check and upload beneficiaries securely. Beyond the standard online platform offered by most brokers, there are still some key differences that could be important when choosing the right provider. For example, if you receive an income in a different currency, an account to receive these funds into could save you a lot of time and money compared to having to first receive these funds into an account with your bank, then convert them with your broker. Can you hold funds on account for a period of time for things like purchases, giving you more control over when to buy currency and then when to send it? Can you easily make multiple payments from one purchase of currency, without any additional cost? If you are selling a property can you receive and hold the sale proceeds in your own currency account with your broker? This will give you more control over the timing of your transfer and mean you aren’t forced into a conversion within a limited timeframe.
