Foreign exchange brokers are specialists in helping businesses and individuals process and manage their currency exchange in a proactive and measured way. They typically assist clients who are needing to transfer large or regular amounts of currency to facilitate this in a competitive way and savings of anything up to 5% on the amount being sent can be anticipated.
How Can A Foreign Exchange Broker Help?
Once registered with a foreign exchange company, clients will enjoy much better levels of guidance that are typically offered at retail banks. Often banks will only offer a day rate and large currency transactions will only be able to be booked over the counter at a local branch.
A specialist foreign exchange broker will be able to offer a much more in-depth view of the market and importantly have a much greater knowledge of the markets and upcoming economic releases which could be either detrimental or beneficial to your transfer. Clients can also request to be contacted and kept abreast of any developments.
Transfer fees from currency foreign exchange brokers can vary but are typically between £5-£10 however many companies offer the bonus of offering their ad-hoc transfers for free meaning clients can enjoy drastically improved rates and reduced or no transfer fees. Banks charges tend to range from £10 to £30 for a higher priority transfer.
Whilst clients will have to decide whether switching from a Bank to a specialist foreign exchange company is worthwhile. Anybody who is considering making international payments either regularly or for a significant one-off transfer will almost certainly experience a saving and although setting up an account will take a few minutes out of your day the market insight and saving will prove worthwhile.
How do foreign exchange brokers make money if their rates are so competitive?
FX providers buy vast quantities of currency each day meaning they have access to excellent pricing. Whilst they don’t receive as good pricing as leading banks, they purely focus on foreign exchange transfers rather than investments and mortgages, meaning they don’t come in to contact with debt leading products.
In turn, they become experts in the field and receive lots of repeat business. Whilst the margins made on foreign exchange transfers are much slimmer than investments and loans due to their effectiveness and great levels of service they typically retain their clients for life with many clients using a foreign exchange brokers multiple times a year.
How does a Foreign exchange broker make money?
Brokers make money from the spread or margin between the rate at which they buy a currency pair and the rate you buy it from. Banks typically charge a spread of up to 4% for foreign exchange transfers, then apply a fee.
Currency brokers charge dramatically less, especially on larger international money transfers. Foreign exchange brokers work with much smaller spreads or margins typically saving clients between 1-4% on the amount being transferred.
Banks Vs Broker Contract Offering
Whilst banks appear to be future-proofing their businesses with more functional and advanced technology it remains exceptionally hard to get personal or tailored service when making overseas purchases or transfers.
Typically banks will insist that clients must make large overseas currency purchases in Branch. Consumers currently find many bank branches closing at a rate of knots making quickly popping to the branch a challenge. Especially if you are located in a more rural location. Other banks simply don’t have the appetite to service this requirement and clients will find very little in the way of guidance. Insurance, Bank accounts and credit cards prove much more lucrative and will, therefore, remain a focus and key revenue generator.
Banks that do have a telephone dealing service will rarely offer the depth of Foreign exchange contracts and risk management tools that a specialist Foreign exchange company will be able to, these contracts can be highly beneficial to companies with regular large international payments or clients who are for example purchasing property overseas and have the time to benefit from rate movement.
When would I want to use a foreign exchange broker?
Whenever you need to convert funds from one currency to another. This could be for many reasons including buying an overseas home, paying a provider for goods, emigrating, sending money to a family member or paying for your child’s international schooling or overseas trip.
Finding a reputable foreign exchange broker
Clients can compare the offerings of foreign exchange brokers in many ways when they need to transfer money globally, either for their personal transfer or business foreign exchange transfers.
- Regulation -always make sure the foreign exchange broker you utilise is authorised or regulated, in the UK, for instance, foreign exchange brokers should be authorized by the FCA (financial conduct authority).
- Length of time in business – typically indicating knowledge of the marketplace, number of customers they’ve assisted and security in the sector. They are most likely to have helped many various personal and business clients who have transferred money overseas and also handled various scenarios.
- Transfer fee or no transfer fee – especially worth thinking about when the payments being sent overseas are small. A transfer fee can offset the advantages of sending the money overseas through a bank or broker even if the rate provided is competitive. All brokers promoted on Foreign Exchange Live work on a fee-free basis.
- Online transfer & telephone – on-line transfer applications are wonderful for small transfers overseas. Recourse can be sluggish if the money goes astray. Customer support when dealing entirely online can vary from one app to another. Much of this service is via a chat/text box or email. A reputable foreign exchange broker will operate both an online and telephone dealing service. Affording you the to speak directly to an account manager who will be helped by a back-office team or client service division.
- Online reviews – websites such as trust pilot and Feefo can provide a great insight into the quality of service your foreign exchange broker offers.
Personal Foreign Exchange
FX brokers tend to have a significant focus on the private client sector with their clients typically electing to use their services to transfer money for property and investments. Many will utilise foreign exchange broker services when acquiring a second home in the sun or relocating. Once relocated, their ongoing payments such as salary and pension payments could be transferred abroad.
Expatriates that are paid in another currency will need the services of a foreign exchange broker to revert the currency to the local denomination. Although clients can use fx broker services for multiple uses including; payment of a destination wedding, luxury holidays and overseas car purchase or student fees for children studying or interning internationally.
Documents needed for a personal foreign exchange account
The application to open your personal foreign exchange account can be wrapped up within a few mins. The first step is to provide your personal information and a summary of transfer requirements. As soon as this step is complete you will need to supply the following documents for your account to be accepted.
- A valid form of photo ID
- Recent utility bill or address proof (less than 3 months old)
The foreign exchange provider will then get in touch and talk through your personal transfer requirements in more depth.
Business Foreign Exchange
Foreign exchange services become even more relevant for businesses. Many businesses will either invoice internationally or purchase raw materials or products from overseas. Although banks tend to act more proactively for businesses, SME’s can sometimes be forgotten with a focus being allotted to larger corporations and businesses.
A currency foreign exchange broker will have many ways for their clients to trade, including app’s and online platforms ensuring small business owners get great service and pricing. Business owners tend to enjoy the fruits of a proactive account manager, the ability to hedge contracts and generally a more proactive approach to their foreign exchange exposure. Plus have the added benefit of saving on both the FX spread and reduced transfer fees.
Multiple International Payments Overseas
Businesses that might be used to making hundreds if not thousands of small regular payments can also benefit from improved services levels. Traditionally these payments would have needed to be entered by a payments clerk or admin assistant, sometimes taking days to create a payments batch. Leading currency foreign exchange brokers possess systems that allow businesses to intuitively make thousands of payments at the click of a mouse, reducing fees, improving their currency foreign exchange transparency and rate and critically reducing the time spent on making these payments dramatically.
Sectors that can typically benefit from these include the travel industry, royalty companies and payroll businesses. Although any business that makes batch payments with over 50 beneficiaries can immediately see an improvement and reducing the time spent on making international payments.
The last 20 years have seen the emergence of superpowers such as Amazon and eBay and whilst the UK high street slowly slips into obscurity the number of online retailers or online sellers as they are known multiplies. These online sellers immediately have access to a global market and therefore will have clients paying in a multitude of currencies. The online sellers is then faced with an FX exposure which will eventually need to be converted to back to the online sellers base currency.
Some currency foreign exchange brokers now offer wallet accounts which enable to online sellers to collect payments in several currencies and also have the functionality of being able to use these funds to pay for their goods or services. For example, an online retailer might receive payments in US Dollars and can use these funds to purchase goods overseas, using the Dollars they have accrued from their sales.
Documents for a Corporate foreign exchange broker account
The process for applying for a corporate foreign exchange broker is slightly more involved. The level of paperwork required will depend on the size of the company, where the money is sent to and from and the currency pairs involved. Typically the foreign exchange broker will perform its due diligence to minimise the paperwork required but typically the will need to identify-
- the overall owner of the business
- a shareholder with 25% or more equity (individuals or businesses)
- company structure
- overall currency requirements
the completion of the corporate foreign exchange account will allow the business to access a full range of relevant products including online sellers service, multiple payments platforms and telephone and online dealing services.