Moving overseas? Need to know how to transfer your cash?

Interbank, mid-market’s, limit orders, forward contracts…foreign exchange can often seem exceptionally complicated, but it really doesn’t need to be. Imagine your foreign exchange as buying a product, exchanging one currency for another at a market related rate.

When selecting a foreign exchange provider there are 5 key characteristics to look out for:

1. Safety of Funds

How can you be sure that your funds are safe?

The first important point of consideration is the nature of your provider’s bank accounts. Your funds should be deposited into and traded out of segregated client treasury accounts, so that in the event of something “happening”, your money is safely in the hands of the bank.

Secondly, is your foreign exchange provider regulated and authorised? Make sure you choose one that is responsible to the FCA, SARB, ASIC and the FSB, and therefore will not risk trading in any way that prejudices its own client, shareholders, directors and key individuals.

Check that they are at least FCA regulated.

2. The Fees

Are you being charged too much?

You may be subject to many ‘hidden’ bank charges. A foreign exchange provider may charge a fee per transaction as well as a sending fee. In addition the receiving bank may also take a fee.

As a rule of thumb, if a provider is charging a fee on a ‘per transaction’ basis, you are not getting the best deal.

3. The Spread

What is the spread?

In foreign exchange trading there are two prices on a currency pair at any given time. There is the buying price and the selling price. The spread is the difference between those two prices.

The spread should never be more than 2% from the interbank rate (the benchmark rate you will see on the news and in the newspaper – the rate at which the banks buy/sell currency to and from each other). A bank will generally take between 3-6% from the interbank rate and is therefore not an optimal currency source. You should always check your spread against the rate quoted on your provider’s home page,. Depending on your provider, the spread can be between 0.4-10% from mid-market rates. Don’t be fooled by the ‘no fee and no commission’ sell – the price will be hidden in the spread!

Ask your provider if they are able to price match, if they are then they are generally offering a good spread.

4. An Online Platform

Does the provider have an online platform?

Having access to an online trading platform provides additional visibility and allows you to trade as and when you require. It is also important that your provider offers brokerage over the phone and via email so that you can ask for advice and assistance at your convenience.

Having both online and over the phone trading availability is essential for oversight and ease.

5. Do You Trust Them?

A foreign exchange provider should always know their client.

It is important for your provider to make sure that they know who is transferring money, and to verify that they are in fact who they say they are. By the same token, you should know your provider.

Although trust is difficult to quantify, it is possibly the most important factor.

This article was written in association with Sable Forex. More information about foreign exchange can be found at their website: http://www.sable-group.com/, or by calling an advisor on +44207 759 5403.