Our very own Onboarding Manager, Paul Harris, shared his handy tips on making a large currency transaction with the team at Help with my Visa! He also talks through some vital information on protecting your money from the risks of currency fluctuations in these uncertain times.
Read his top tips below and watch the full interview here.
You’re going to talk us through your top tips for getting the most out of big currency transactions but before we jump into that, can you give us a flavour of Smart Currency Exchange and what the company is all about?
As a business, Smart Currency has been operating for around 15 years. We’ve helped over 40,000 people in various different situations to transfer money either in or out of the UK or other countries. We make sure that if the customer is budgeting for something, they can keep the costs as manageable as possible. We pride ourselves on the service that we offer.
What would a typical customer look like for Smart Currency Exchange? I’m assuming it’s not the kind of person who is nipping in to buy a few euros at the airport – it’s a slightly different clientele, right?
Yes, exactly. We don’t operate in the cash industry so it’s purely bank-to-bank transfers. Our typical client could be anybody who needs to transfer money overseas, either in or out of the country or in or out of the currency.
Find out more about how locking in an exchange rate with a Forward Contract can help you avoid losing money. Click here to fill in our form.
Okay, so it may be international students who, if going to another country to study, need to make big transfers for course fees, or people investing in businesses and properties overseas – is this the kind of person that you would typically work with?
Absolutely! So, our main area is property, but we do help a number of international students, international investors and people that are emigrating as well. Also, it’s not just the large transfers that we help you with. There are often smaller follow-on transfers that we can help you with as well. We look to support you throughout your entire journey.
So that that must mean that it is super important to make sure that you’ve got the best approach to transferring this type of money. I guess even just the smallest difference in currency exchange rates could have a very big impact on the end result?
Exactly – if you’re looking at a large transfer, certainly if it’s a property purchase or even if you are coming over as an international student with a large sum of money, the smallest difference in the market can have a big impact on how much your budget is worth in the new currency.
Excellent. So, it really does pay to work with experts like yourself to make sure that you’re getting the right deal!
Top Tip 1: Understand your budget
So on to your top tips. Tip number one – how do we get started to make sure we’re getting the best out of our big currency exchanges?
Top tip number one is understanding your budget. That could be a budget that you have to spend on a property, it could be an amount of money that you are bringing into the UK or bringing into another country. It could also often be life savings that you are looking to transfer into another currency.
So, really understanding how much and how far that budget can go is vital. That’s where forward planning and understanding lots of different aspects of the process can come into play. Therefore, understanding your budget early is our first big tip and that’s going to help you in the long run.
Top tip 2: Understand the risks associated
Market risk is the biggest risk associated with currency. The market will only ever go one of two ways – either up or down. It doesn’t matter who you speak to, nobody can actually tell you what’s going to happen from one day to the next.
There are lots of things that that can happen to influence the markets. For example, the recent pandemic has had a huge impact on currency markets and we’ve seen some real depreciation in various currencies, the pound being one of those. So, understanding the risk that’s associated can have a big impact on how much you will end up with or how much things will cost.
Top tip 3: Always protect your budget against market risk
Are there ways that people can manage this risk?
Yes, absolutely. Our biggest tip is to work with the specialists to come up with a solution to protect your finances. It could be a forward contract, we could look to target markets for you or at various different small hedging strategies, just to make sure that you’re protected as much as possible along the way.
So when you say things like forward contract and hedging strategies, in my mind I’m thinking market city traders and people who buy and sell for a living – is that what we’re talking about here? What do you mean by forward contracts?
It’s not quite the glitz and glam that you see on the films like Wolf of Wall Street, unfortunately! It’s simpler than that. A forward contract is our best way of protecting a cost. It is a legal contract to buy a certain amount of currency at an agreed rate in the future.
So, if you were buying a property and it was half a million euros, you could then fix in an exchange rate today using a forward contract. By doing this, you’ll know exactly how much that’s going to cost you in say, British pounds, no matter what happens with the exchange rate in the coming weeks or even months.
It protects you so if we do have an unfortunate event where the rates drop, the rate you’ve locked in is guaranteed. It’s a really popular product with someone that is looking to either invest or move overseas, giving them peace of mind that the amount that we’ve agreed is guaranteed. They then know exactly how much is going to end up in the country that they’re sending money to.
If you hold out to wait for a better exchange rate before locking the rate in, there’s a chance you could be lucky. However, if you have the fear of losing out on money, locking in a forward contract and protecting your budget is much better than the reward of gaining a little bit extra in the market. It gives you complete peace of mind.
You also mentioned hedging, which is slightly different – can you explain what it involves?
It works very similarly. We have certain clients that will be moving overseas and they may want to just move part of their money and fix part of the money at a certain exchange rate, and that’s absolutely fine. Again, it just gives them peace of mind that some of the budget and some of their money is protected at a certain exchange rate. It gives you a little bit more flexibility than a straightforward forward contract but obviously comes with more risk.
Top tip 4: Don’t try to predict the markets and be wary of forecasts
I’ve been in this industry for around 10 years now and we see lots of different forecasts from lots of different areas, including big banks and other exchange houses. One thing you’ll notice if you read just three or four of them, is that they’re often completely different. So, it’s always wise to be a bit wary and avoid basing your decisions on these predictions.
It doesn’t matter how long you’ve worked in the industry, you still can’t tell what’s going to happen from one second to the next. Forecasts can give you some good insight but often they can be based on the opinion of just one person. So, try not to read too much into these!
A common line that you hear across all trading floors is that if we could predict the future, we’d all be sitting on a beach somewhere!
Top tip 5: Don’t use the bank
You may think that I’m saying this because the banks are our competitors but in reality, the banks aren’t really our competitors at all! The bank won’t give you the same level of service and you probably won’t get the same exchange rate. They often won’t be very clear on their exchange rates, either.
However, we can help you out and really get inside those exchange rates for you and make sure that your costs are manageable, and that you end up with more in the destination currency. So a very simple top tip for number five but it’s an important one – do not use the banks.
I know exactly what you’re talking about. Having carried out a lot of phone currency transactions between euro bank accounts and British pound bank accounts with my own business, just trying to find out what the day’s exchange rate is, is really hard!