Undeniably a post aimed at the un-inducted first time currency exchanger - whether a business convinced there must be a cheaper way to manage currencies, or an individual seduced by the idea of challenging banking norms - here we will look at a couple of simple tips on acquitting yourself positively before engaging in discussions with a specialist.
As with all our posts we will weave in references to first hand case studies, but, in a different approach to our usual patter, we will also reference some of the businesses we work with who can aide you in arriving at an understanding of your position and how best to proceed with a broker, Prime Cap.
We were recently told that we need to do more to link our articles and posts back to our partners and to informations sources useful to our readers.
Hence, if you see reference to a third party please be assured that, unless otherwise specified, we work along side them to greater or lesser extent and, where third party links are included/embedded, they are so because we think the content they provide ties directly to the topic being discussed. If you would like introductions to qualified regulated third parties on matter relating to ta, accounting, law and wealth advisory then we would ask you to contact our broking team directly either by telephone on 0203 172 8193 or by email on firstname.lastname@example.org.
So, where should you begin your research in to the type of transaction you may need to conduct and where should you be looking to make sure you have the appropriate advice and guidance as to the suitability of the broker you may be considering?
The first thing we would suggest is that you talk with the professional services business that might be, no matter how tangentially or directly, advising you to make an international payment.
So, common reasons for an individual engaging in an international transaction are:
1+ . Bringing capital in to the UK for the purchase of a property.
2+ . Sending money from the UK following the sale of an asset (perhaps a property).
3+ . Receiving a bequest from a deceased third party.
4+ . Paying a bill you owe to someone based in a different country.
5+ . Receiving a payment from a company of business outside the UK.
6+ . Paying for a holiday.
7+ . Arranging payment for a wedding abroad.
A+ . Usually someone is recommended to speak with us by their financial adviser or their solicitor (the party involved in the conveyancing for a property purchase).
You may have a relative who is providing you with the deposit amount or larger capital contribution. Indeed, for those buying in London you may well have stacked up foreign currency savings in your home country or in the region you've been working in prior to relocation to the UK.
The things that we are concerned with in this instance is the 'source of the funds' and the 'source of your wealth'.
These are two different things.
The former, the source of funds, is essentially detail about the account this money is coming from. Where is it held? Is it held in your name of the name of someone else.
If held in the name of someone else, who is that person? Why are they sending you the funds and what is you relationship to them? And, why are you not able to send these funds from your own account to us?
We're not trying to catch a client out with these questions and answering them ties in precisely to our due diligence and the extent to which we 'know our client'.
The latter of the two - the 'source of your wealth' - relates to how you came by what might well be a sizeable amount of money.
Have you saved up? If the amount you exchanging is large, how have you been able to save up this sum? Have you sold a property abroad? Are you a dependant of someone who is paying these funds to you? Have you divorced and this is part of your settlement?
Unlike the source of funds, the question over source of wealth is a more personal series of questions designed, in a sense, to test the extent to which you are prepared to be forthcoming about the money you wish to exchange.
One of the main questions posed by clients when faced with these types of questions from our compliance team, prior to your engagement of our services, is that other financial institutions do not ask for this level of detail.
Well, in fact they do. If you are making a sizeable deposit in to your personal currency account, you bank is going to have this information to hand and if they do not they will ask you to clarify it. Generally banks can communicate between themselves anyway, so they immediately have more of this crucial context than a firm like Prime Cap would.
One way we encourage clients to look at it is: if you have documentary evidence in support of the questions being asked of you, then, in order to benefit from the sizeable improvements out services can offer you (through our rates etc.) you simply need to share this information with us.
If you would rather keep your matter to yourself, then, exchanging currencies with a broker like us might not be for you. Our hope is that we can make sufficiently compelling a case in favour of our suitability and the financial benefit you will get from what we do that you feel happy, comfortable and willing to share with us.
Almost all of the 7 headings above will touch on the questions of source of wealth and source of funds when you initially speak with us. This is because this information is in fact core to us forming an understanding of how best you might use us, and getting to know you as our client.
B+. If you have sold an asset in the UK, denominated in sterling (GBP) then, through the network of wealth managers, solicitors and accountants that we have built up over the years, you will likely be introduced to us before those funds are sent to their final or next destination.
Specifically in the case of property sales, on completion your solicitor will ask you where you would like your funds transmitted.
It is important to remember that, if you provide your solicitor with details of your foreign currency account, you will have to suffer whatever rate of exchange your bank apply on the arrival of those funds.
You can ask your solicitor to send you the foreign currency equivalent of the GBP realised, but, please remember that this too leaves you at the mercy of your solicitor's bankers and whatever rate they chose to give you.
That rate of conversion is not set by your solicitor, but rather by whomever they bank with.
Many of the law firms we transact with use banks like Coutts.
Whilst their name is synonymous with excellence, their rates are not bespoke and therefore fall short of the level of competition you would probably expect.
C+. Personal recommendation forms the backbone of our industry.
It is certainly fair to say that just because someone you know have used a company without issue does not mean that company it sound when it comes to their continued business activities.
One of the main areas of concern for private and business clients alike is worries over loosing your money. Worries relating to you sending money to a currency company and nothing coming out the other end and arriving with the person you are trying to send funds to.
Yes, personal recommendation is the cornerstone of Prime Cap's business development strategy and it goes a long way to reassure nervous clients and partners as to the strength of our presence and the fortitude of our health as a business, but, there are some things you can and should look out for when vetting a currency firm.
Firstly, who regulates this firm?
The company many be like Prime Cap, who use the regulatory frame work of a third
party for the receipt and sending of client money.
We use an 'Authorised Payment Institution' called Ebury to serve as the collector of our client funds.
Other currency brokers may administer segregated client trust accounts directly under
their own roof and so are directly subject to the conditions and policies of the Financial Conduct Authority, but whether a currency broker operates on Prime Cap's model or under their own banner, you will be able to verify, check and research them or their nominated transaction partners through the FCA register.
As touched on, one of the main concerns about using a specialist currency company is this notion of sending money off in to the ether and for it never to reappear.
Core to the FCA governance over our services, either directly or by agency, is the use of segregated client trust accounts.
These are bank accounts held with EU regulated financial/credit institutions (high street banks to you and I) that are totally and always separate from the day to day banking accounts of the business that uses them.
The sole purpose of the segregated accounts is to receive money from clients. Your funds arrive in to a segregated account and they leave the currency firm from a segregated account.
This means that there are a number of fail safes at an institutional level that protect and overseas the arrival, handling and onward transmission of your money.
That might not mean much to you, but, they key is to establish that the currency broker you're considering uses segregated account (held directly or by agency). If you can establish that the firm does not use segregated accounts then you should avoid using them and you should consider whether to report that business to the sector regulator.
If you are able to establish that segregated accounts are used for the receipt and transmission of funds, and you can do this through the FCA register, then we encourage you to take confidence that all the power, might and weight of the UK financial services regulator are being applied to ensure that no errant behaviour is being engaged in the might jeopardise your funds and their swift and fluid transmission to their intended destination.
D+. Do you know where you would like to send your money?
You might be surprised to learn that a number of our private client buy currency from us before they have firmed up to whom they would like it to be paid.
Again, when it comes to property (and please don't leave this post thinking property transactions is all we do) you may not have found the house you want to secure abroad but you know how many pounds you want to spend and are keep to get then in to euros. We can assist with this.
It is interesting to note that when it comes to buying and selling houses in as fluid a market as London, the general rule of thumb is that if you have to sell something in order to afford to buy something, it is best to begin your onward search once you are 'under offer'.
Funnily enough you can apply a similar sort of sentiment to buying property abroad...because it is totally true to say that you won't know what you have to spend in euros until you actually convert your pounds.
Of course, a firm like Prime Cap can make it easier to estimate what you might have to spend, but, movements in the rate of exchange mean that trying to gauge these things purely on your own can leave you with some surprises and invariably means you end up having less than you thought to spend.
Whilst we will always check and verify the onward banking details you give us, we suggest you confirm with whichever beneficiary (if you know who they are) that they have the appropriate coordinates to give you.
It would be frustrating for you if you bought currency from us only to find that the supplier you're paying doesn't know the details for their own account...and, whilst it may seem silly to suggest that could be the case, it happens all too often because the international bank details of an account are not the same as the domestic bank details of an account.
Take as an example your own GBP sterling account. You may be used to provide a Sort Code and an Account Number, but, if someone in France wanted to send you money you would need to provide them with something called and IBAN and SWIFT code.
These are relatively easy to locate (and we can of course talk you through identifying these details) but, those terms may be alien to you and therefore finding out what you need from the person you're sending funds to if a valuable exercise.
Countries with particularities to their banking details are the likes of the United States, Australia, New Zealand and Canada.
It is fair to say that the mere fact that these countries have different details and the fact that you mightn't have known that were it not for the fact that we have just mentioned it, goes to illustrate the value in talking to someone who does this sort of thing on a daily basis - self important though that may sound.
E+. Does your bank impose any restrictions on how much you can send each day?
Within the UK most payments are settled using an inter-bank messaging system called the Faster Payment System. This is quite literally a way of one bank communicating instantly with another and informing of the transmission and application of amounts from one account to another.
UK banks put a cap on what a business or an individual can move using this system.
It tends to £25,000 per day for businesses and £10,000 per day for individuals...however, not all banks do the same.
Some give you a limit per transaction. This means you could make 5 payments of £10,000 if you wanted to.
For businesses banks might have a different restriction for international payments vs. those that are purely UK based, or, they may tailor your caps to your activity.
Either way, you can ask your bank to change what they allow you to send each day and, in cases where banks are not prepared to be flexible, we can be.
So, if you need to pay us £50,000 but you can only send us £10,000 a day, we will tailor our terms to ensure that you have enough time to get those funds to us.
For one thing you could send them all in one go if you visit your bank in person, but, this usually carries a charge, so, as suggested, we tailor our expectations to make sure they match up with what you bank permits.
All that we ask if that you let us know of your bank's stipulations and restrictions. Whilst telling us after the event (i.e. after you have asked us to buy the currency on our usual terms) is not much of an issue, it is best practise for us to know when our clients are likely to pay us. For one thing is means we can can tweak our communications with you about settlement.
In summary then, the key things to you can do to prepare yourself for an exchange, whether with you bank or through a broker, focus on knowing what your bank will let you know, confirming where funds are to be sent and, in the case of using a specialist, making sure you feel comfortable that they/we are forthcoming about our regulatory set up and working/sending/receiving only with segregated accounts.
It goes without saying, we hope, that picking up the phone is the best and quickest way for us to address any questions you may have on this and other issues.
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