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Client: "My bank is pretty good", Me: "What does that mean...?"

I don't want to get too Carrie Bradshaw about this blog, but, sometimes simple conversations with my contacts throw up interesting topics deserving of expansion.

A Paris based property consultant has a US client.

The client's purchase is due to complete a month from now.

The consultant calls me because, in conversation with the client, he was told that "My bank is pretty good, they give me the spot rate...".

The consultant just wants to confirm a) what that expression means and b) whether there is still merit in suggesting the client speak with Prime Cap.

My reaction was to wince.

When someone tells me their bank gives them the 'spot rate', the 'day rate', 'two pips off', a 'good rate' etc etc etc. I immediately question what it is that has defined the rate they're offered as any of those things. How does one know a rate if 'good' if one has not compared it against a rate that is good?

Often I find that a client is comparing their bank's rate to a tourist cash rate...the sort of thing one might see at the airport. So, of course, any bank is going to seem competitive when pitted against a bureau de change.

First one thing, a 'spot rate' is an expression that relates to the contract being used for a transaction, not to the level of competition of the rate for that contract. So, one's bank saying they're offering you the 'spot rate' is like them offering you a "repayment mortgage"...and you wouldn't blindly take a repayment product without knowing the interest rate!

So, how to respond to this consultant's perfectly valid question.

The first thing to say on that front is that, from experience, sophisticated clients don't like to be told that what they think is competitive, accurate and valuable might not be. So, I suggested my contact take a different approach.

Because, in a relative sense, very few banking customers in one country actually sending money internationally, the foreign exchange services available to individuals at a retail level are limited to very vanilla transfer capabilities.

There are extremely few variations to the simple login, get quote, exchange and send process that characterises most foreign exchange dealings with one's bank. Therefore, the products and bespoke contracts companies like Prime Cap can broker are an important lure, particularly when it comes to property.

Presenting the client with a contact able to discuss the fixing of a USD to EUR rate of exchange for the four-week window until his completion means that the consultant needn't be drawn on price or whether or not a bank is or isn't competitive on the rate of exchange...the product and it's rarity is the lure, not the price.

The solution is what's for sale.

Needless to say, if you have a client who you think could benefit from a bit of help with currency, but you're not sure how to splice in a recommendation, I'd be happy to talk you through how you could present a firm like us to them.


The colossal cynic in me believes that banks benefit inordinately from a lack of understanding on the part of retail customers.

Take a client who recently told me their bank was 'good'..."i get a rate '2 pips' from what see online."

I thought this an odd thing to say. For one thing, as a broker, Prime Cap enjoys a rate 2 pips from the market from our largest market maker. We place millions of dollars worth of business with this API annually, and they are a multi-billion dollar business. Has my client been harbouring wealth I know nothing about?

It turns out my client has confused two pips - which is the difference between 1.20(00) and 1.1998 with two cents. He was seeing 1.20 online and receiving a rate of 1.18 from his bank. Whilst not grossly uncompetitive, 1.18 is more than 1.5% less competitive than it should be - and my client thought he was getting extreme value simply because of errant use of a financial expression.

Another client went into Barclays bank to ask for a rate of exchange. They wanted to send sterling to France. The cashier mis-read their daily pricing screen and told the client a rate for exchanging for selling euros into sterling...the upshot of which was that the client thought Barclays were offering him a better rate than I was for the exchange. We had an odd conversation - during which I questioned my own sanity slightly - but, I advised the client to 'bite Barclay''s' arm off. It was only when he asked to proceed that the cashier's error was revealed.


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