There are many ways to send money overseas. For many of my clients, it’s the first time they’ve transferred money abroad – often the case being for a first time property purchase in Europe, Australia, South Africa or elsewhere.
Here’s how one of my average clients, for example, goes about sending money overseas when buying a property:
Joe and Jean Bloggs from Surrey have found their dream home in France. Their notaire has let them know that they need to send €210,000 across for an outright purchase. Having saved for some time this new holiday, they will be purchasing their new home from home with cash.
There are two ways Joe and Jean can send funds through to the notaire: a high street bank and their currency account, or they can make the transfer through a specialist currency broker.
Transferring with the Bank
Having gone to the bank, Joe and Jean asked how much it was going to cost in Sterling to send €210,000 to France. Their bank then offered £182,291.67 which they would need to pay including all transfer charges and exchange rate considerations to get the full €210,000 to the notaire dealing with the property purchase.
The rate they had in fact been offered was 1.1520. They were also told that if they booked it all that day, the funds would reach France in 3 working days. For what they had intended, the exchange rate and timescale seemed to suit them fine.
However, Joe and Jean had been following the exchange rates online and knew the mid-market rate had been 1.20 for most of the week and thought that this would be a good rate to achieve as a buying price. The difference though, having working it out, between the calculations for their budget and what they could actually achieve was £7291.67 more expensive.
Mid-Market Rate – The constantly moving exchange rate (affected by data releases, politics, facts, etc) used between banks on multi million pound transactions/exchanges and not a level obtainable to an individual looking to do a one-off transfer, this is a mistake often made by people who are new to looking at the market and are surprised when not offered it as a buying price. The mid-market is of great use to follow the general direction a currency pair may be moving in but not used to set a budget around. When buying currencies look below to buy and sell above, how far below and above can depend on the institution you choose to buy or sell through.
Transfer with a Specialist Currency Broker
After ascertaining how much it would cost them through their bank, Joe and Jean Bloggs, jumped online to research other currency transfer options. What they found was that there are other ways to send money to their notaire, safely and at a better rate of exchange than their bank would be able to offer them.
What they found was a specialist currency brokerage where they could get a better rate and exchange, and, speak to a broker as opposed to having to use an automated online service.
Having called up and spoken to someone in one of the brokerages they found, they were assigned a dedicated account manager who spent just 15 minutes giving them all the required information and how he could save Joe and Jean potentially thousands. The broker explained:
- The company was a Ltd company registered with companies house and had been running for almost 7 years, and he himself had been helping clients save money on exchange rates for the last two years. The company could achieve commercial levels of exchange for individuals, like Mr and Mrs Bloggs, because they were seen as a ‘wholesaler’ of currencies by their buying sources, allowing them to buy much closer to the Mid-Market Rate and possibly saving Mr and Mrs Bloggs thousands.
- The company was authorised and registered with the Financial Services Authority as a small payments institute, and all of their funds would only be ever kept in client segregated accounts. This was to ensure, much like a solicitor, that if anything were to happen to the company then their funds would be secure and returned to the original account from which they came.
- The company only operated on an execution basis, immediately fixing an exchange upon the client’s request. No decision can be made on the client’s behalf without consent.
- The reason why they would get a dedicated account manager was so that they could be informed of anything that may affect their exchange rate, good or bad. They could relax safe in the knowledge that they had somebody watching the market for them. Jean and Joe had enough to worry about with everything else surrounding buying a property abroad, let alone understanding market fluctuations, data releases, politics etc.
- They were offered 4 different types of contract – Spot Deal, Forward Contract, Stop/Loss and a Limit Order – to book their currency with. For their situation they both agreed that a Spot Deal was most relevant. There would also be no transfer charges for sending their money overseas either.
- They were then asked to open an account with the brokers, which would take 5 minutes online, filling out a simple form that would ask for their Full names, addresses, and date of births. The facility itself was non-obligatory and could be easily shut if it wasn’t used and at their request. The brokers needed this information as they have to adhere to strict guidelines set by HMRC. As soon as the account was activated they could call their account manager and ask him for a live price for buying €210,000.
Mr and Mrs Bloggs decided it was worth opening the account to see what live buying rate they could achieve. They filled out the online form and were swiftly called by their account manager who proceeded to get a live rate of exchange from his various sources whilst they were popped on hold. The broker came back through to them with a live exchange rate which they could accept or decline of 1.1867. For the entire €210,000 would cost them in sterling £176,961.32, making them a saving of £5330.35 compared with their bank.
If they wanted to agree a rate of exchange then the account manager would run through a legally binding verbal agreement and send them a contract note explaining everything they had done on the phone.
It was then left to Mr and Mrs Bloggs to transfer the Sterling from their personal bank to the currency brokerage (of which all the details were on the contract note) and to forward all of their notaires details to their account manager. As soon as the Sterling landed in full with the brokerage all of the euros would be forwarded straight out to their notaire for completion on the purchase of the property.
Start to finish the whole process took Mr and Mrs Bloggs 1 hour but they managed to save £5330.35 which bought them a new kitchen in their beautiful new house in the Riviera.