Our client works for a company located in East Africa.
He retains a residential address in the UK and yet his family split their time between EA and London. Said client is paid monthly in US dollars. He has financial obligations in the UK, but also in his country of work too.
How should he approach the whens and hows of sending money back to the UK, the time difference between where he works and where he banks and the particulars of holding more than one currency at a time?
On the face of it this is quite simply a case of someone receiving a foreign currency on a regular basis. Like many businesses selling in foreign markets and repatriating the revenue, our client is an employee who is remunerated in the currency of his employer, rather than the currency of his expenses. C'est la vie. He needs a way to confidently send USD 'home' at a good rate and with minimal fuss.
So, we have set him up with our 'View Only' default service setting. Initially this setting simply means that we, Prime Cap, only watch what he does through our online platform. We do not interfere or provide point of sale advice, as such. We know when he has uploaded things like beneficiary details and we check them. We can see when he has lodged USD with us (which he now does automatically when he is paid each month) but we do not venture our opinions on timing, contract or execution method; 'View Only' is as the name suggests.
It was only after a few months of trading with us that the client fed back something interesting. We were very happy with his understanding of our platform, having taken him through it's use over the telephone after his application had been processed. In fact, so content was he that he has referred us on to a number of colleagues in a similar position.
Anyway, we noticed a distinct pattern emerge in our client's trading habits. He tended to login to our system before the working day began (given that his working day began some hours before ours in the UK, we found this noteworthy). Noticing this told us something about both the information he might be exposed to (in terms of rates and news etc.) and that, were he presented with different information he might think differently about when he converts his currency.
Given that he is selling US dollar and buying sterling (for the most part) the US markets wouldn't usually open until much later in his working day. Not until he was very much and firmly offline. Furthermore, actually, he was waking up in East Africa and considering his options...this was before the UK market was even open. We note this because weekends can be pretty crucial when it comes to the market's digestion of political news and discourse. Transacting before markets open can very well mean you're executing before information has had a chance to move rates.
The View Only setting is a tacit agreement between the Prime Cap team and our clients to leave them alone. From experience we know that sending emailers with updates or daily digests of markets movements can be tedious. They are invariably inbox garbage. Hence, methodologically, our team will only contact a client if we have something actionable to share. Yes, good customer service and customer experience development dictates that we touch in from time to time, but, our team have to include something useful in the communication. An explanation as to our thoughts on our client's trading patterns is an example of the useful insight we are striving to offer.
We explained to the client that because he is transacting when he is (timing wise), executing trades in this arbitrary fashion, although unremarkable, is tantamount whimsical dealing. He is benefitting not one jot from the time at which he is electing to transact. Undoubtedly he is choosing this time of day because it is convenient for him. Our mission is to provide him with the same level of convenience, but execute his trades in such a way as to maximise the buying power of the currency he is selling (in as far as we are able without exposing him to undue risk of rates moving against him).
One of the unique aspects of the Prime Cap offering is the clever and flexible use of structured product/service wrappers. Devised by our team these operating packages are designed to enable both us and our clients to execute payments at the optimum moment and in the most convenient and efficient way.
We have advised our client to make use of our 'Execution Only' service. Now, we are aware that when one starts using words like 'packaged' clients can hear alarm bells and wonder whether a broker is looking to pigeon hole them into a particular way of working. In one sense we are doing this, because the structures and protocols we use are there to achieve the broadest level of success, but electing to make use of one of these wrappers is entirely subjective. If the client's interests are best served by labelling their dealing habits then we will advocate so doing. If not then we will not...there is no compromising of our core purpose or values.
The 'Execution Only' wrapper basically means that the client can ask our team to buy or sell currency at any time - at a time, for instance, when the client is unable to login to their platform. We might receive and email asking us to sell 'x' number of USD. We will do so and then hand the reigns back over the client to populate all the relevant details like beneficiary information or when the payment should be sent to the recipient.
Much like with the difference between 'discretionary' and 'execution only' in a fund or asset management set ups, on this setting we will only execute the transaction for the client. We are not using our discretion to determine when the best time to transact is.
Now, what 'Execution Only' does enable us to do is engage in a dialogue with the client at the point of sale. We will often be asked about what the market is doing...has all the day's data been released? What does our economic calendars show will be coming to market?
Short of handling every aspect of the transaction from start to finish, Execution Only is an extremely effective way of working to a strategy, but in such a way that our client does not feel she has relinquished control.
So, advising on the use of this off-the-shelf wrapper we are trying to move the client away from dealing first thing in their morning. Doing so was actually a bit more of a disadvantage than anything else. There was no benefit to it. Whereas with the EO setting, the client can rest assured that a) he has done everything correctly (largely because we are doing it for him) and b) he has maximised his chances of the rate being best.
Interestingly, our client recently suggested that he instruct his employer to send his salary to us directly. This is eminently possible and we simply ask for something outlining the relationship between his employer (considered a 'third party') and him in order to authenticate certain due diligence concerns we have to satisfy.
Tax, given that our client is earning offshore, is a consideration in a scenario like this. Prime Cap works very closely with a number of international tax specialists, many of whom work only with the expatriate community. Whilst it is not our core business, introducing our clients to such professionals is all part of the value chain we look to create. As it happens, tax specialists of the type we might refer do in fact send work our way too.
If you would like any more information about any of our off-the-shelf or bespoke payment solutions, or you would like us to assist with the sourcing of new contacts able to advise you on the intricacies of multi-currency exposure on and offshore, please do give us a ring on 02031728193.