Content, content, content. In a bid to flesh out our swelling blog and case-study portfolio I asked the team "What can we blog about next?". They were no help at all and threw out topics like "what bank accounts help the international business man..." and "5 ways to keep ahead of interest rate rises". So, I have turned domestic and think it both relevant and generous, on behalf of the Prime Cap team and the wider deliverable FX community, to do that which many of our peers take for granted and explain what we do and why it is useful. This won't be Prime Cap talking about what Prime Cap does well - for that you can give us a call. This is an attempt to outline why it is silly, pure and simple, to use a less competitive method of sending or receiving money, and an attempt to explain the actual ways in which we do what we do, how we make money doing it and why it is here to stay. First off, 'foreign exchange'. I'm told that even this expression could do with some clarification. Foreign exchange and its various abbreviations and acronyms (Forex & FX) is simply the general financial term for the exchanging of one currency for another. Nothing more, nothing less. Foreign exchange services are the ways and helpful forms of assistance, whether via human guidance or online systems, that you can exchange one currency for another. It may seem odd, but, when you electronically transmit your pounds sterling to a euro account, you are in effect exchanging the currency you hold for the currency you want in quite a literal sense. Sterling does not just turn into the other currency because it enters the bank account of the other currency. An actual contract is struck and a transaction takes place. The pounds you used to own/hold always remain as pounds and, in fact, never leave the UK. They are simply substituted for euros from within the country you're sending the money and then reflected in your euro bank account. The same is true of US dollars. None actually physically leave the United States...they are simply digitally reflected as the currency you've bought in the account denominated in that currency, wherever that is geographically. Now, I mentioned that you are essentially 'exchanging' the currency you have for the currency you want. You are striking an agreement with whomever you're exchanging your pounds with. Unfortunately for you, Mr I.N. Dividual, there are very very few people with whom you can legitimately exchange your pounds. Furthermore, the financial system is set up so that for individuals like you the 'buyer' of the currency you hold, the institution or company you're exchanging with, is essentially in complete control over what amount of euros they're prepared to give you for the pound you hold. You are, in relative terms, exchanging such a small amount of money (in the context of the foreign exchange markets where banks might be exchanging billions of GBP a day) that you basically don't get any say in what price you can command for it. This is a shame, but, it is the nature of the system and it does stand to reason that the entity with the largest amount of something tends to call the shots on what they will charge you for it. All this pre-amble boils down to the fact that not every bank exchanges currency at the same rate or with the same type of customer. I mentioned before about the fact that you are exchanging a small amount of money when compared with the overall amount transacted daily across the financial world, well, by going to someone (an institution, a business or even an individual in some cases) who exchanges more than you, you may be able to piggy back off the improved rate they get from the person they exchange money with. It is kind like a tiered system where the higher up the tiers and the larger the volume and the more regular the transactions, the better the terms. You, Mr I.N. Dividual, can piggy back onto my rate and, provided I want to, can receive the rate that I get. If you were transacting many millions, if not billions, of pounds worth of currency then you're bank would give you the same rate they give me. I am still doing exactly the same thing as you. I am essentially logging in to my online banking and asking my bank what rate of exchange they will give me for the £1 I want to transmit, but, that £1 is in fact £10,000 and I have 1000 clients who want to exchange £10,000 on any given day. Mr Bank is going to give me a nicer rate because he doesn't want me going up the road to his competitor. It is cheaper for him to sell me euros and for me to then deal with my 1000 clients than it is for Mr Bank to actually tailor the way he works toward dealing with those 1000 himself. He is effectively selling me what I want at a wholesale rate. I then pass it on to you...if I am a scrupulous broker...at better than retail. You can get retail from Mr Bank, so, all I have to do is make sure my margin is less than his. Now, if I gave you the same rate of exchange that I receive from Mr Bank then, in essence, you're doing much better than you would dealing with Mr Bank yourself, however, I, on the other hand, am receiving a lot of sterling and exchanging it for a lot of euros, but, unless I charge you something, the same money coming in is the same money as is going out, only it is now denominated in euros. In some ways this is the most common misconception and confusing aspect of the role of a broker like me - how do I make any money out of giving you the euros the bank has sold me, and, what is a reasonable charge for the rate/benefit I am giving you? I make money from the fact that I receive 000s of pounds and send out 000s of euros thus: I shave a small percentage off the amount of euros I give you for your £1. By way of example. You send me the £1 you want to exchange. Mr Bank has told you he will give you €1.10 for it. Mr Bank tells me that because of my strong and longstanding relationship with him he will give me €1.20 for the £1 I want to exchange with him. As said before, were I to give you that €1.20 then at the end of the day there would be nothing left in my account...what has come in has gone out. So, I offer you €1.15 in exchange for your £1. You are therefore receiving €0.05 more because you are allowing me to exchange your £1 with Mr Bank. I am also making €0.05 for my services. If we scale up that example to £10,000 for you, then rather than the €11,000 your bank has offered you, I am offering you €11,500. I am keeping €500 for myself and we both go our separate ways, happy in the knowledge that we have both done equally as well out of the exchange as the other. In principle this is the way the deliverable foreign exchange sector works. 'Deliverable' meaning you, or the foreign currency bank account you want your euros paid to, is actually taking physical receipt of the currency; I am buying and delivering it for you. One thing to note - in the modern financial world and, given the regulations on financial transactions and sending money, one needs to physically collect or receive all of those £1s in order to exchange them with the Bank. Companies like Prime Cap and Ebury Partners (one of our partners) cannot feasibly set up individual bank accounts for every single one of our clients to send their £1 to; this would be madness and near impossible to achieve. So, our industry regulator the 'Financial Conduct Authority' (FCA) allows foreign exchange businesses to collect all these £1s into one account. Every clients' money in one account. Some clients do find this unnerving. What happens if my money gets mis-labelled? What happens if an unscrupulous employee accesses this one account and sends it's contents somewhere they shouldn't? What happens if the company runs up debts it cannot pay - does the money they hold for me get used to pay? Well, the regulations are very strict. The banks we use to hold these type of collection bank accounts - known as 'Segregated Client Trust' accounts - are subject to regular audit. Any company itself must have sufficient amounts of its own money to be able to cover the appropriate proportion of its liabilities at any one time. This means that no businesses complying with the FCA rules should have less money of their own, not yours, than is necessary to satisfy debtors - you may have heard of this referred to as capital adequacy/reserves in the context of high street bank after the financial crash. To that end, these 'collection' accounts (my term, not a commonly used one) are 'segregated' from the company's books and management accounts. Although your £1 is sat in an account along with the £1s of all my other clients, it is not mingled with my company money at all. The segregated account is in my name, not yours...but, this is simply because Mr Bank is selling me all those €s and not my clients individually. When you register to become my client I simultaneously create a profile and a footprint for you on my FCA approved Client Relationship Management system (CRM). These profiles/signature are indelibly linked to any money I receive for you; hence, were I'm hit by a bus and the list of whose money is whose goes missing, my bank and my own company internal systems (which have to be compliant and accessible in themselves too) will tell the regulator what money I am holding and who it belongs to; it is then returned. I recently heard a story about a tour manager for a band who, despite sending payments all over the world on a regular basis, resolutely refuses to use a 'broker' like Prime Cap for his payments even though he knows Prime Cap and our ilk can save him some money. He prefers to work with his bank. Prime Cap's approach is not to dismiss his preference. Of course we'd remain resolute and confident that we could ensure some money was left in his account because of our rates, but, we take a slightly less serious view when it comes to pursuing new business. By that I mean that if you are in the business of sending money, the paradigm is not 'bank vs. non-bank'. Foreign exchange companies are basically just a different provider of a foreign currency. The sector is regulated in much the same way as the banking sector when it comes to holding client money, money laundering and 'know your client' and, over time, what we do will only become more and more main stream. This will undoubtedly prompt banks to try and compete, of course, but, for now there are enough of the tour managers around that the bank isn't pushed to lower their prices. Plus, they're selling to businesses like us anyway so just shifting their model to a wholesale one rather than retail. It is worth mentioning that Prime Cap's 'collection' accounts (I'm unsure whether that term deserves to stick or not) are held with a wholesale corporate FX company called Ebury Partners. Ebury turnover a couple of billion pounds a year, so they are firmly in the top tier (aka Tier 1) of the corporate FX houses. Our work with the private client sector is something they envy (we tell ourselves), but, in essence, using their collection accounts helps Prime Cap stay on top of regulatory changes and improvements to the way a payment gets to its destination. In essence, you do not send your £1 to Prime Cap's segregated accounts. Instead you send them to those of Ebury. They are the custodian of our settlements. They are also the institution we buy a lot of our currency from, so we know we are getting the benefit of the colossal amounts they trade at a wholesale level and we simply mark that up a fraction when pricing for you. If you'd like us to explain more about that set up, and it would be our pleasure so to do, then give us a ring on 02031728193. #Ebury #FX #bank #international #euro #GBP #sterling #PrimeCap #PrimeCapPayments #foreignexchange

As far a currencies, payments, people and companies are concerned, each may be affected in the same and different ways simultaneously. The UK's withdrawal from 'Europe', the single market and the close alliance with our continental neighbours may very well change our entire outlook on trading and payments, not because the public voted for that, but as an inevitable reaction to the change in our relationship with Europe. Most blogs written since June 2016 have concluded that we just do not know what is in store because negotiations have yet to be concluded. One thing we at Prime Cap can be sure of though is that there will be change and change, in an economy as committed to growth as the UK is, will mean improvement in our view. Essentially, for those sending payments to foreign currency denominated accounts, it is business as usual; your UK bank will still use the same payment networks and currencies will still be readily available. The rate will be changing, of course, but twas ever thus and, you may well find that the dust settling on the UK's exit terms brings much longed for stability and some predictability to the forex markets. Regardless of whether or not you're a business paying a supplier or an individual topping up their euro or dollar account, the mechanisms by which you do this and the time it takes to arrive etc. will remain the same in the near term. Or rather, there has been no suggestion that these activities will change in any way and to conclude they simply must change because other things will is to express an overly pessimistic view. Overlay onto this the fact that relations with a huge swathe of those operating in the global market place will be changing and you have to recognise the fact that it is not just the method of dealing as we do now which 'could' change, but the reasons why and the costs of so doing may go up or, in fact, down. One school of thought is that withdrawal from European directives on financial regulation could breathe new life into certain segments of the UK economy, not least the technology we all rely on to send and receive money. A change in trade arrangements with the United States may well cause USD to increase in value. Losing GBP exports...or rather, having current export markets augmented by the introduction of other players, may undermine the value of the euro. Also, any lack of new trade agreements is only going to bring pain to whichever government is in power after the transition period. No deal will prompt concern over economic growth, and a bad deal would tie the UK to a longer term millstone. All of these and none of them could play out. At the moment the US is one of the hardest markets, in terms of payments and international movement of capital, for non-bank entities to operate in. Such are the financial and tax regulations that an individual resident in the United States is not permitted to use a foreign exchange broker based in somewhere like the UK, even though that person may have holding in the UK or be doing something like buying a property. They may not use such an entity unless that money service business is registered and licensed in the state in which the prospective client is resident. This makes it prohibitive for boutique firms to deal with US residents because we can hardly justify the expense and the work needed to register in all the American states. So, does Brexit and increased financial proximity to the US mean that new markets will open up? Potentially very much so. As The Chancellor (Philip Hammond as of 21/08/17) said, all be it rather faintly, the economy underpins any conversation you care to have about Britain's post EU future. Inflation is a key and immediate concern and, given stagnation in wage increases, could very well see an increase in interest rates. This raises the issue of consumer debt and the ability of families to service borrowings they secured whilst interest rates were at an all time low. Are national savings low because consumers are confident in better times and calmer waters, or because the cost of living has gone up, so, to maintain living standards, families are living more hand to mouth? Interest rates and their associated effects are one of the key drivers of currency strength. Even speculation well in advance of any change in policy or rates can have a significant effect on a rate of exchange. Ironically though, should interest rates go up in the UK and although the pound may rally fractionally, beneath that increase in rates there sits the decomposing remains or a buoyant economy (dark). Without an increase in wages to match, consumers will be caught out. The playing out of this across the markets, when coupled with no clear trade agreements, may very well see a flight from the pound which would see GBP drop and inflation increase further as import costs go up. Confidence and optimism, real as well as imagined, is what the markets needs. Whatever your feelings on what voting to leave the EU says about the people who did, in the immediate present, living standards, employment and debt/spending would and will all benefit from optimism from the consumer and clarity from those in government. Dealing with a broad range of individual FX requirements and a variety of businesses puts Prime Cap in a strong position in terms of feed back and chatter as to the concerns of a cross-section of British life who may or may not be affected by changes coming down the road. Anecdotally, one of the most interesting perspectives is the view that one's personal relationship with Europe and the freedoms one enjoys when it comes to travel and tourism will undoubtedly be affected by our leaving the European bloc. Why is it that someone's immediate conclusion is that things will change. We appreciate that things must change, but those luxuries that the main-street enjoys are unlikely to be altered in such a way as to completely remove them from being. By that we mean that just because we're leaving the EU doesn't mean, necessarily, you'll find it any harder to holiday in the South of France or your roaming fees will go back up. Both sides want things to stay as close to how they were as possible in terms of day to day life; those who voted to stay in the EU should take some confidence from that...those who voted leave didn't vote for a total about turn on our way of life as we currently know it (he says). Agriculture, namely farming, stands to be affected following our excision from the Common Agricultural Policy. Single farm payments: those lump sums paid to farmers, which subsidise them to such an extent as to enable them to compete with their continental neighbours, may well tail off by some measure. One wonders whether that mightn't be a good thing. Was Woolworths bailed out or subsidised so as to remain on the British high-street? No. Such was and is the nature of survival on the high street that the retailer could not survive. Focussing on competition within a domestic market should drive both innovation and a correction in production and costs. Sad that an industry may be forever changed, but, this is what the majority of Brits who voted voted for. In the housing market, many renters were motivated to vote leave by some arguably flawed belief that the price of buying a house would drop. This view fundamentally fails to understand what drives the market and, at the same time, expresses the labyrinthine nature of the 'consumer debt increase while rates are low' paradigm. Foreign buyers of the type often criticised in the press and on main street are not those economic migrants arriving in the UK and, despite oft highly qualified, doing low paid unskilled jobs. They are the growing middles classes of countries who do not enjoy the freedom and security that Britain takes for granted (yes, we are aware this seems a touch 'ranty', but it is fair to say that we expect our streets to be policed and our military to be loyal to the government of the day). The UK is considered stable by the vast majority of nations. It is that stability and the fact that the state won't tax certain holdings or simply appropriate them which is what overseas investors and the buyers of a number of properties prize and indeed purchase for. These folks are not going to suddenly disappear because the Jolly Roger is no longer flying in Brussels; and, for the most part, it wouldn't surprise Prime Cap if there were an increase in the 'open door' rhetoric that The Mayor of London is keep to peddle. Rich foreigners, investors or not, are an important part of local economies especially in London where residential property is the corner stone of many high-streets and local networks. Having said all this, there are just about enough owners of property, and would-be owners of property, in the UK who are waiting to see what conditions and terms are agreed between the UK and the EU to have caused a wobble in confidence. Commentators then layer on the an uncompromising dose of innuendo and speculation which seeps down on to main-street and into the first-time-buyers' fear that now would not be a sensible time to borrow more than they could ever earn. They rent. They don't save. They stress eat and drink, which, because of price wars in supermarkets - supermarkets terrified of posting sub-par figures - means they ingest ever higher levels of nutritionally bankrupt E numbers. This is why recessions and depressions tend to be considered both inevitable and self fulfilling; the best way to buck the trend and exceed expectation, in this instance, is for the government to offer something truly meaningful and powerful around which we can all agree and about which the UK in general can get excited. Fingers crossed that happens soon. Aside from the disappointing anti-social overtones the referendum's outcome seems to illuminate, the effect on our clients is essentially that the price of what they wish to buy - by that we mean their 'buying power' as is - will go down in the near term. Prime Cap remains confident though that other suitors will come to market (once we have extracted ourselves from the single one) to fill the slots and, although their wears may be different, normality should resume in about 5 years. All of this reshuffle should actually present an opportunity within the payments space for innovation and a greater understanding of how the practical tools you might use to export successfully already exist and can make a profound difference to your bottom line. Yes, headlines are shouting about 'eight year low' over here and 'three month decline' over there, but, this is totally to be expected and we suspect that in some dank corner of the Bank of England an economist is sitting there weeping for joy; weeping because they had feared it would be so much worse. Most folks are failing to appreciate just how significant a shift Brexit means. We should have a free falling currency. We will have a contracting economy. These are the things that we knew would happen. Maybe more could have been done to prepare us for these effects, but had more been done then the point finger of 'project fear' would have been thrust into the faces of everyone who has even the slimmest grasp of basic market economics. It is not the end of the world. We will get through this, and with change will come improvement. If you would like one of our team to add some spice to this and many other outspoken interpretations of contemporary existentialism then do call us on 02031728193. #fx #FX #EU #GBP #EUR #Europe #Britain #Property #farming #singlemarket #supplier #currencies #export #exports

Our client, the buyer, was referred to us by their conveyancing solicitor. The vendor in this sale is a corporate entity based in the United States. Although buying a house in Prime Central London, our client, intentionally or not, used us as a means of enticing their vendor to accept a foreign currency denominated offer, to the benefit of all. Previously our client's offer(s) had been rejected on the basis that, due to a weak pound, the sterling figure offered did not equate to sufficient US dollars to satisfy the vendor, or, more specifically, it's various stakeholders. In essence, the rate of exchange was scuppering what would have been a done deal. In this instance we were able to assist in a number of ways and to aid more than one of the stakeholders in the process. First of all, we were in a position to enable our client to offer just over 2% more to the vendor than was previously the case. By electing to use Prime Cap for the conversion of their GBP to USD, the buyer's rate of exchange improved by over 2%. They had previously been talking with their private bank, a venerable but aged institution, and it was clear to us that we could feasibly undercut the rate they offered by quite some margin. This is often the case because, whilst clients might get preferential prices on money market instruments with their private bank - lending and saving - foreign exchange tends not to be a marketable product for the bank. Hence, the infrequent use of their dealers means competition is not a driver in determining the price the client gets. One way of looking at this particular brief is to say that we made a strong case for the buyer viewing this as a purchase denominated in US dollars, rather than sterling. By doing this and by appropriating the FX exposure on the transaction the buyer was able to offer a good 2% more without actually increasing their own GBP outlay. Given that Prime Cap was only introduced to the buyer and not the vendor, we weren't able to offer the vendor the benefit of our rate when converting whatever GBP amount was offered by the buyer; at the end of the day that would have achieved a similar result as it might have inclined the vendor to accept a quote of 2% less. You'd be wise to note that between an offer being accepted, contracts being exchange and the deal being formally completed, rates of exchange will and do go up and down. In this particular instance, the deal rested totally on the vendor achieving a US sum. As broker for the buyer our objective was to make sure that an adverse movement in the rate between GBP and USD did not leave our client unable to satisfy the vendors need. We could simply have suggested that the buyer engage a forward contract right from the point at which their offer was accepted...therefore guaranteeing that they had enough sterling to buy the USD their vendor wanted. However, doing so would have left our client wildly exposed to the whim of the vendor. Prior to the exchange of contracts our client was without any guarantee that the sale would progress and, even then, were it to progress but for the vendor to withdraw, our client would be left holding a foreign currency in a volatile market and without any certainty as to their ability to rebuy back the GBP amount they started with. Fortunately both sides' solicitors were able to reach the point of exchange quickly. This prompted our client, the buyer, to purchase the USD sum on a forward contract. Doing so meant that regardless of movements in the rate between exchange and completion, our client's GBP would achieve the USD amount necessary for the deal to remain viable. It is fair to say that although the rate of exchange played an unwelcome part in negotiations, the vendor was eager to rid themselves of an asset whose USD value was so unpredictable. We suspect that the volatility of the rate was a strong factor in the vendor bringing the property to market in the first place; hence, our buyer was both the victim and the beneficiary of not only changeable rates, but expert navigation through them. For live rates simply call one of our team on 02031728193. #USD #forward #buyer #seller #vendor #international #corporate #investment #volatile #Sterling #PrimeCap

Many small businesses can accurately, if not precisely, calculate their projected sales in the nearer term...over the coming two months, let's say. If buying items, components or actual products from suppliers abroad, small businesses will face just as real a foreign exchange exposure as their larger peers. The same tools and techniques that could mitigate the exposure of a larger business can be utilised by smaller businesses, and to the same effect, however, banks do not offer hedging solutions to businesses with a lesser turnover. This is where firms like Prime Cap can be of distinct use. If summer is your peak retail season and you can comfortably say you expect to spend $15,000 buying in product to then sell, we can facilitate the purchase of the currency you need now but simply delay the date by which you need to pay for it. This serves more than one purpose. The first being that you are fixing your margin by ensuring that the sterling you would have paid for this stock purchase has not increased between now and when you actually envisage paying for the stock itself. The second is that, from a cash flow perspective, you're not tying up your working capital. Using a 'forward contract' - just one of the tools our dealers specialise in - fixes the rate today but enables you to pay for a booking anywhere up to 18 months from today. It's a buy now pay later. Some foreign currency brokers ask you to lodge a deposit amount with them for the duration of the contract. This is so as to cover them in case you decide against actually paying for the currency on the due date - very unlikely. By virtue of the relationships we have forged, Prime Cap achieve terms that forego the need for a deposit in certain instances. It all comes down to the bespoke way we price and execute recommendations. Ordinarily a business would look to forward buy (or 'hedge' as it is sometimes referred to) when the rate of exchange is firmly in their favour. This ensures that payments executed in the future can utilise the same favourable rate; however, more and more we are seeing businesses looking to use forward buying as a means of protecting themselves from volatility. They're not focusing on where the rate of exchange is necessarily, but more that they should not be caught off-guard by it's movement. The client referred to above, like many, thought himself too small a business to be able to use a product like a forward. Back in the day he might have been correct because they were only really offered by banks to their large clients in sectors like mining, grain and oil & gas. A number of airlines got themselves in a tangle with their forward buying not too long ago, so it is understandable that smaller companies assume they wouldn't have access to this type of tool...but, through brokers like Prime Cap, small businesses can now use these instruments and do so at rates of exchange that are always more competitive than those on the high street. If you would like a live price on a forward contract for whichever currencies you deal in then feel free to pick up the phone to our dealing team on 02031728193. #FX #hedge #forward #EUR #GBO #USD #contract #currency #international #bank

Our client is a sole trading interior designer. Much of her time is spent developing her own properties in both London and South Africa, for which Prime Cap is her broker, but, on occasion, she will take on commissions from private clients. Her customer will ask her to execute every transaction associated with procurement for the scheme, whether that means arranging deliveries, commissioning bespoke pieces or even sourcing items and elements from supplier in the UK and abroad. This is actually somewhat uncommon because most interior design practices will request that the client pay a supplier direct and then take a cut of the supplier’s mark up by way of a referral fee - it is commonly done. Putting that to one side though, it recently interested us to note that our client, the designer, marks up the rates of exchange we quote her when she invoices her customer. Say, for instance, a cobalt blue ostrich skin Hermes sofa sold solely through their Italian concession costs €64,000. My client asks me for a rate of exchange. May be we quote 1.5 (for argument’s sake) which equates to a cost of £42666.67. Knowing that our rate is undercutting that which her customer would be offered, our client adds on a margin to my rate of exchange. She calculates the GBP cost using a rate of 1.45 (because she knows, having consulted with us, that her customer’s bank will give him 1.40). Our client then invoices her customer to the tune of £44,137.93. By virtue of her ‘connections’ and using her broker from whom she gets preferential commercial rates, the interior designer has saved her customer £1576.36. She has also pocketed for herself £1471.26. With the same interior design client we also used a forward contract to fix the cost of her then customer’s kitchen. It was an expensive item coming in at nearly €215,000. In a similar fashion to the sofa transaction, my client (the designer) negotiated not only a preferential rate for her customer, but also enable her customer to fix the sterling price of the kitchen. She, the designer, did not have to concern herself with a changing rate of exchange and her customer knew precisely where he stood come final payment for his kitchen. It must be conceded that Interiors ‘firms’ use foreign currencies in a number of different ways. Some of them just settle invoices from foreign suppliers which is totally fair enough, but, when dealing with a retail customer there is always scope to bolster one’s profit margin through comprehension of the foreign exchange side of things. It is this type of hands-on guidance that you cannot get from an online foreign currency system. It was someone high up at Lloyd Bank who confirmed that there will always be a market for individual brokers because hearing the confidence in someone’s voice and knowing you can rely on their perhaps greater understanding of the subject matter is now and will always be worth paying for. If you are interested in this sort of service then give us a call on 02031728193 #SouthAfrica #Hermes #Broker #London #property #interior #design #FX #EUR #ZAR #USD

Foreign exchange is a pretty boring subject. It is a fascinating job to have, but, the focus of the profession does not translate well into scintillating dinner party conversation. For that reason and others we've concluded that the more imaginative ways in which one might use a foreign exchange broker can sometimes get overlooked. It is not that big a shame, but, it does mean people waste money where they needn’t. In our opinion the bottom line is largely that if there is a different currency involved, at all, then speak to Prime Cap to see if you can save yourself a bit of money. It may be that you can’t, but, at the very least you’ll have had a riotous currency conversation 1. SCHOOL FEES: This one is very simple and incorporates two of the most usual foreign exchange contracts to assist parents who have sent their children to a school abroad - whether that be in the UK or outside of it. It is equally applicable, we suppose, for those entering tertiary education as overseas students and paying school fees. Were we to say that one pays fees on a termly basis, so, every 3 months or so, you might wish to consider one of two solutions… a) you can simply buy the amount of sterling (I’ll assume you’re child is being schooled in the UK) you need to pay for that term’s tuition. A broker can shave quite an attractive margin off your home currency spend here because he can provide a better rate of exchange than you are likely to receive from your domestic bank when sending. The GBP amount you need to send the school does not change, of course, but the number of EURs, HKDs, USDs or SGDs you pay is reduced. b) you can buy the whole years’ worth of currency ‘forward‘. The merits of doing so are enhanced when and if the rate of exchange is favourable. At the time of writing this post the pound is at a distinct low vs USD and EUR. Now would be the time, as we approach the summer holiday, to lock in the rate for next years’ tuition and just sit back happy in the knowledge that you don’t need to worry about the rate of exchange until this time next year. Your broker can even diarise to contact you as and when your termly draw downs (payments) are due. Your just send the correct amount of your domestic currency and the broker can credit the school directly. 2. WEDDINGS: For the past two years we have been sending the odd £500 to £1400 over to Italy for a couple who intended to wed there. They will need to pay their suppliers, venues, caterers etc. with euros and they simply do not want to use debit cards as and when. By setting up a EUR account the groom in this tale made a very shrewd move. The groom and his fiancé could convert money whenever the rates was considered good and just deposit it for safe keeping in their own EUR account for withdrawal nearer the wedding day. Alternatively the couple could ask their broker to send payments directly to the supplier if they wanted. It gave them the utmost flexibility in terms of access to their wedding savings. 3. HOLIDAYS: If you are going away with enough people, whether it be to a villa in the South of France, a chalet in the Alpes or a honeymoon in South East Asia, you can use a foreign exchange specialist for the payments and save yourself a bob or two. Now, it must be conceded that commercial foreign exchange, such as that done by specialist non-banking institutions, does benefit you more the greater the amount of currency you convert. We estimate our savings on a percentage basis. Whilst they are consistent savings, it could be that on smaller sums things like the associated costs of sending a payment are more competitive when done through a bank. By way of example: I need to send £500 to Wee Jimmy in Australia. My bank offers me an exchange rate of 2 to the pound. This means my £500 equates to $1000. But my bank may charge me £15 for sending those funds. Hence, in reality I am paying £515 for $1000. Simple maths tells us that this is actually a rate of conversion of 1.9417 (roughly a 6% margin). So, not as competitive as we thought? Take an FX firm. Most big FX firms task their currency dealers with making a minimum amount of margin per transaction. A former employer of one of our brokers, now a competitor, used to demand £20 be made on each exchange. Straight away this means that, regardless of any fee this FX firm might charge, they have to quote a rate of exchange with a 4% margin just to make £20 profit off the rate. Assuming that your bank was marking up their rate by 3%, a 4% margin would be a rate of worse than 1.99 even before we get to the cost of sending a payment. It is almost not worth it for the company to compete with your bank here. So, they likely wont. But, consider a payment of $10,000 for our honeymoon. Or the fact that 10 of you could easily spend £1000 if not more for a week skiing. On these amounts the amount of profit a foreign currency firms needs to make becomes a fraction of the percentage required on a smaller figure and could quite comfortably translate in £200 – £300, if not more, saved. Prime Cap takes a different approach. As a boutique, our brokers are not targeted to make a minimum revenue amount on an exchange. We believe that incremental growth of our portfolio is more valuable than one off profit. By this we mean that 100 clients who earn us £10 are more valuable than 10 clients who earn us £100. Yes, the resulting revenue is the same however you spin it, but, we would rather have 100 voices willing to endorse us than just 10. Our brokers have total autonomy over the pricing of their book of clients. One of the most frequent questions we are asked is 'what is your minimum transfer amount?'. Our response - we do not have one. If our system means you pay less to use us, and it does not leave us at a loss to facilitate your transaction, then you are at liberty to use our services; no ifs, no buts. 4. VEHICLES: If we accept that any business who holds a bank account can receive an electronic payment, then the fact that you can pay for a vehicle more competitively by negotiating the foreign currency price for it comes as no surprise. Some potential customers remain just that, potential customers, because they think that their activities are so niche that they might not benefit from the same tools that are commonly used for more main stream dealings. Vehicles, whether they are cars or combine harvesters, trailer or trains…if they are made and sold abroad, even if they are bought in the UK, can be paid for in a foreign currency and in such a way that is means you are paying less in your home currency for the same product. 5. DIVORCE: Mentioning no names; a long standing client of ours, a solicitor, introduced us to one of his clients. He was acting for a lady who stood to be awarded a sizeable amount of money. What this lady didn’t appreciate was that, were our client's law firm entrusted with the transmission of her settlement to her own bank account (which was in Switzerland), she would get far less than she thought she might. Factors worth considering here are that the rate of exchange undoubtedly changed during the course of her legal proceedings; was this taken into account? She would be spending her time in more that one country, so, was it sensible for her lawyer to pay the full settlement amount into her primary country of residence, or, would she benefit from splitting it between certain currencies and certain accounts? If she does not hold a sterling account at all then she might find it useful to have one and the sort of segregated facility that a non-bank FX firm provides. 6. DEATH We mention in the ‘earning in a different currency‘ post about a contact who inherited funds from Canada. Well, it is not just Canada my friends – if your children or beneficiaries live outside the UK and you die, they will effectively be taxed to received whatever funds you may have left them because of the arbitrary exchange methods usually used; likewise you, were you to be sent a financial bequest over whose conversion you have no control. Believe us, we are aware that the rate of exchange will likely be the very last thing on your mind in that circumstance, but, that doesn’t mean to say you should simply swallow the 3% you’ll lose because you’re bank trades at that margin by default. 7. TAXES: Gosh this post just keeps getting jollier and jollier doesn’t it! Gloom to one side, as we write this is occurs to us that the mundane and the niche are two things that many people overlook for FX. There are tons and tons of tax planners who specialise in doing tax returns for resident non-doms or US citizens who have to send funds back home to please the authorities. Very very few of these tax advisers will outwardly and opening advocate the use of an FX provider. Does recommending a firm like Prime Cap present the perception of conflict of interest? The idea that you might be taking a kick back or a percentage in commission? To that we feel justified in asking: a) do you really think your client is going to care that you get a kick back if they receive the level of care and attention as well as the savings they can and should? b) don’t take a kick back. We work with a couple of financial services providers who make a point of informing their customers that they benefit in no way, financially, from the relationships they have and the recommendations they make. T This is sweet, but, personally we think it a waste of time and, frankly, disingenuous because if your reputation is enhanced by the introduction you’ve made; if the person you have recommended makes you look good; then we would say you have gotten something far far more valuable than a kick back. You can very easily substitute your bank for an FX broker when you’re sending funds for things like taxes. We currently have a few clients who send funds to Ireland using our services for their 'rates' etc. and it works very well provided they ask us to put the correct reference on the payment. If you would like to find out how we would approach a more exotic or abstract currency matter then simply give our trading team a call on 02031728193. #death #wills #inheritance #taxes #wedding #holiday #currency #FX #Ireland #GBP #Fees

1. UNLESS YOU HAVE FOREIGN CURRENCY EXPENSES, YOU’RE GOING TO NEED TO CONVERT YOUR FOREIGN CURRENCY REVENUE. We love the HSBC advert with the little girl selling lemonade: ‘I’m on the phone to my supplier in France!’. It is charming and positively prophetic in its illustration of a) how easy it is for small businesses to deal internationally b) how simple small businesses think it is and will be to sell in a country other than your own. We like the advert, but it is silly. It is all well and good being able to buy your lemons from France when the rate of exchange enables you to purchase them for less than you might spend in your native country (or anywhere else for that matter), but, what happens when that exchange rate changes, goes against you and you have not spent the time developing your domestic supply chain in such a way as to ensure you have an exit strategy? To be fair, the two paragraphs above relate more to those importing product and selling it domestically. This post as a whole is about selling your wears in a foreign currency. So it is written with the lemon supplier in mind. He prices his French grown euro priced lemons in US dollars to enable him to sell to this little girl. It’s a wonder she buys from him given the uncertainty about freight leaving France. Shipping is no doubt cheap, but will the product ever arrive I ask you? Lemons grown in France and sold to a US lemonade producer. Unless the lemon producer is also buying things in from the US or has other forms of expenses in the United States (a sales agent for instance, or a US office) the total sum of the US he is paid by the little girl need to be converted back into euros, otherwise how is he going to pay his staff, rent etc. Added to which it is fiendishly difficult to open a US dollar bank account in the US for the collection of his USD earnings. So, at the moment our lemon producer is simply getting the little girl to electronically send the US dollars to his french euro account and he is simply taking whatever rate of exchange he gets ‘on the chin’ because he doesn’t know of another way. He is losing about 5% on his margin because he has no control over the timing of the conversion or the spread on the exchange rate. Our lemon producer is having rather a sorry time of it, FX speaking, but he is certainly not alone. THE SOLUTION: If, like our lemon producer, you don’t know how to open a foreign currency account into which your overseas customer can pay your earnings, or you don’t want to because once funds are in there you don’t know what to do with them from an accountancy perspective, then you can simply use the client trust account facilities of a specialist FX firm. If you’re foreign sales grow then it is only natural that you will evolve into the sort of business that has an understanding of how to receive funds, but, until that time Prime Cap and our nominated Authorised Payment Institution can receive a foreign currency for you from your equivalent of the young lemonade seller in the US. You then get to decide, with the help of Prime Cap's dealers, when you want to convert funds, if you need to convert funds and whether or not the method you are inclined to use is the most competitive way of doing so. 2. IF YOU CAN AVOID CONVERTING CURRENCIES…DO. The relationship between the little girl and her french supplier is not uncommon. As touched on in the preface, the profit margin of the little girl is affected positively and/or negatively by the movements in the exchange rate. Conversely the supplier is affected by the rate he can achieve when converting his US dollar earnings back into euros. Now, hopefully you can see that if the girl is paying in euros and the supplier is earning in US dollars, they are both converting currencies. That is not what happens in a conventional import vs export relationship. What would be point. If the girl pays in euros then the supplier receives euros. If the supplier gets paid in US dollars then the girl isnt affected by the rate of exchange because she is paying in the currency that she earns in. So, what this example boils down to…and who is affected by the rate of exchange, for good or ill, depends on who carries the foreign currency exposure. By exposure I mean who is exposed to those movements in the rate of exchange. Your exposure is the amount you stand to lose should the value of what you hold drop. There are reasons why the little girl might want to carry the FX exposure and reasons why she might not. Equally the same can be said for the supplier…for instance, is either or both of them are dealing in other ways with foreign currencies they may want to be paid in those foreign currencies. Advantages to taking on FX exposure are that, provided the market is favourable, you can make more margin by locking in better rates using things like forward contracts. Getting your customer to pay you in the currency you need isn’t too much of a stretch, but, it is worth considering that the foreign currency amount they will have to pay is something over which you won’t have any control and might leave you vulnerable to the possibility that your customer can actually source domestically or in a different currency market for less. If you are selling a product that isn’t produced anywhere else, then you command the upper hand, but, the foreign currency fluctuations and your keenness to protect you margin may push you into uncompetitive territory. 3. THE RATE OF EXCHANGE CAN GIVE YOU THAT COMPETITIVE EDGE. As above, if you are selling a UK made product overseas you may find that being able to price it, with your customer being able to purchase it, in their own currency is what allows you to compete directly with their would-be local suppliers – of course it doesnt have to be a UK made product…and our site stats suggest we have a number of readers from the Far East and the US…so the same applies to you, just in the market local to you. ‘Currency controls’ in your own country may have an effect on the ease with which you can buy and sell currencies on the open market and I will touch on those concerns in a subsequent post. We are often asked by online retailers who might take orders through something like shopify how best to manage the FX side of things if their customers are not paying in the currency the retailer operates in. Whilst that in itself warrants is own post, Being unafraid to price in your customers’ currency will add massively to you marketing collateral. There are rudimentary tools already around that can assist you in receiving payments in different currencies, but, from what we have seen these are mass-market solutions that prioritise convenience over actual competition on cost. You’re paying a premium for something that is perceived as easier to operate; but, our assertion is that tailored solutions are no less easy to use. They come with a built in safety mechanism – someone who is looking out for your objectives – and they are far more scale-able than the DIY platforms out there because they can change as your business changes. If you are using something like Paypal to collect payments from online sales, whilst admittedly appealing because it allows you as the customer to have oversight of what you’re selling and earning, you are losing out hugely on the margin and perhaps missing a trick because of the limited tools available to you. With both compromise and reason you can arrive at certain concrete rates the achievement of which inform you forecasts and behavior over the longer term. You should be reviewing your FX exposure and operating rates as regularly as you review your pricing strategy. The rate of exchange is no longer something that just happens to be a part of your business functions. It is both a tool and a threat to your ongoing stability and so speaking with someone with more experience than you, especially someone who isnt going to charge you a bean until you actually buy something from them in hard currency, is eminently sensible. 4. YOU ARE NOT A CURRENCY SPECULATOR. We're starting to notice that all these points could be tied up in one uber-post as they kind of feed into each other. Separately though they could be read and, if acted upon, can bring different things to the table. One of the hardest things to do, when you’re a deliverable currency dealer, is to convince a customer to favour ‘the known’ and avoid speculation about the rates. Thousands of people are paid millions annually to provide informed and actionable guidance on exchange rate movements. They get it wrong all the time. Yes, they might get it right more than they get it wrong, but, they have cutting edge software, data collection, research and whatnot at their finger tips. Sadly you do not. So, when a whole dealing team of brokers with some 70 years’ of collective experience suggest that you work out the terms of a transaction based on the rate in front of you rather than some rate that has yet to materialise, We're amazed that you/one/clients think it reasonable to say ‘I think I will wait and see’. If we said to you ‘I will sell you this watch for £10 today. If you ask me to sell it to you tomorrow it may or may not cost you £150’ how would you approach the decision you have to make? Lets assume that you have £10. In fact you have £50. Would you try and bet that I’ll sell you the watch for £5 or would you want to avoid paying £150? Based on no other information than the fact that you could see the outcome you are hoping for, are you actually prepared to risk the cost going up many multiples? If not with the watch then why with currency? A business that sells tools is not a business that should be trading in currencies for gain. It is a business that converts currencies because it has to and it’s priority should be ensuring the bottom line does not increase. Yes, if the bottom line goes down then whoop-dee-doo, but it is totally reckless to simply bet on that one way or t’other. What is more, we know of many deliverable currency brokers who, contrary to what is permitted by the FCA, actually outright advise customers on when to buy currency, when to sell and where they think the market will go. This is a big no no. If you currency broker does this, have 850kg of salt delivered to their office because its not a pinch that you should take what they say with… 5. MARGIN IS KING. This concluding point is the accumulation of all the others. Margin, both in terms of the margin applied to the rate by your bank or currency dealer and in terms of your profit margin as a business are the two most important aspects of any foreign exchange transaction for bodies corporate. Do not compromise on these two things unless what you are giving away is simply too good to refuse and, for the conscientious FD I would argue that nothing is more valuable than profit margin. We totally appreciate that it is efficient and easier for the team in accounts payable to log in to an online FX platform and select which beneficiary they want to pay without having to confirm it with anyone by email. But if that convenience comes at the cost of visibility on your margin then I am always going to say it is not worth it, especially when a real person can throw in the benefit of years of experience about whether or not the payment mechanism is the best and most economical one going. Forget the specifics, but a colleague of mine was recently in discussion with a high up in the FX division of a one of the big UK High street banks. This high-up conceded that although he and his team could anticipate what rates it would take to beat smaller brokers like Prime Cap, there would always be a proportion of customers for whom his rather expensive and very flashy online FX platform simply wouldn’t be appealing to. Big banks like big FX firms need bums on seats to sustain a tight margin. If they don’t have sufficient volume then their margin widens because their bills still need to be paid. Their margin widens either in the rate or by reducing costs; moving customers online is a cost reducing exercise. One person can effectively service many hundreds of clients without ever actually speaking with them. This is a shame because the clients’ experience is then one dimensional. Price, or rather cost, isn’t the only thing that induces people to work with a supplier. A price can be higher with one firm that the other and in our experience that the more ‘expensive’ firm is still in business because their customer is happy to pay for the excellent service and the holistic improvement to their margin. If there weren’t such benefits then we doubt the client would still work with that broker…and it is the same the world over, regardless of industry. If you fall into the camp of any of the businesses outlined above or even if you don't about would like to talk to us about your unique challenges then do ring our dealing team on 02031728193. #currency #speculate #fx #invoice #trade #settlement #payment #Paypal #DIY #EUR #GBP

In order for a currency company to both ‘buy’ and ‘sell’ a currency we require three things: The first is a bank account to receive the currency we are converting from, the second is a bank account for the currency we are 'sending' or converting to, and the third is an institution who is prepared to act as market maker to facilitate the transaction. In some cases a currency broker doesn't have to expressly hold an account in a currency to be able to transmit it. We can simply buy the currency from the market making institution in exchange for the currency we do hold (the currency you're 'selling'); however, if you do not hold an account in the currency you wish to convert from then you cannot reasonably hope to execute the intended transaction. Having a bank account in any currency requires a bank to provide you with it. As it stands there are only a few UK banks prepared to provide client accounts, of the segregated kind, to foreign exchange firms, aka ‘Money Service Businesses’. The reasons as to why this is the case belong in another post. In some cases it is simply not possible for a client account to be opened in a particular currency. This is usually in instances where the currency you want to convert to (or buy) isn’t actually available outside of the country in which it is used. Your UK bank doesnt want to receive rare currencies or buy them from you because they have no one to whom they can then sell it on. We refer to this scenario as there 'being no market' for it. Furthermore, typically, if a central bank or government has imposed Currency Controls to limit the movement/dissemination of their local currency, it would not be possible for an FX firm or bank to actually receive in that local currency because said central bank would invariably convert the local tender into a more readily available, openly traded currency - South African Rand (ZAR) is a good example of this. Foreign exchange controls come in various forms. Their effects are felt in relation to both the purchase/sale of foreign currencies by residents and the purchase/sale of local currency by nonresidents. In many instances currency controls can create a false market. In some countries the local residents may use the local currency when transacting between themselves, but they will only be prepared to accept currencies like the US dollar from not residents. This creates an artificial economy which can have a number of tiers to it. Often foreign exchange controls can result in the creation of black markets to exchange the weaker currency for stronger ones. This leads to a situation where the exchange rate for the foreign currency is much higher than the rate set by the government, and therefore creates a shadow currency exchange market. Following the financial crises of the early 1930’s, the application of exchange control became widespread internationally. Among the techniques used by governments were the requisitioning of foreign exchange earnings and bans on exports of capital; also of importance were various compensatory and clearing agreements, of which Germany was the chief exponent. In the early part of the 20th Century, as in many emerging markets and developing economies today, the main object of exchange control was to conserve and increase tangible assets such as gold and to stockpile foreign currency reserves. When wearing my layman’s hat and trying to explain the concept of exchange controls (which it must be firmly noted come in different forms) I think of it thussly: US dollars is the global reserve currency. Countries who want to protect themselves and not limit whom they can deal with will stock pile US dollar. For young economies which still have a somewhat subsistence existence at a grass roots level, the amount of hard currency in circulation can fluctuate wildly and is truly difficult to accurately determine because much of the population won’t have bank accounts. By imposing a currency control you can ensure that, effectively or ineffectively, there is a modicum of stability within the domestic/local currency supply. If one were a government that wants to grow one's country’s economy, one wants to deal in a currency that can be spent anywhere, globally. A bank in France is only going to want to use one's Botswanan Pula if they are planning to invest in Botswana or they have a customer who is. As there are so few entities in need of Botwanan Pula it is sensible for me to deal in something else. One can get one's hands on that ‘something else’ (namely US dollar) by making sure than anyone who wants to do business in my country has to pay me in US dollar. Consider this – there are about 37 countries out there that employ currency controls. This leaves a huge number of countries who do not. It would make little sense for an FX broker to have accounts in every global currency because it is tremendously unlikely they will ever actually need to make a payment in that currency. It would cost the broker just to hold and service those accounts. What most brokers tend to do is hold accounts in the major FX currencies. That way they can be confident that they have an account denominated in the currency their client wishes to ‘sell’. They would only need to hold accounts in the rare and more obscure currencies if their clients wished to convert from those rare or obscure ones. This is unlikely anyway and, even if the client did want to convert something like Botswana Pula into GBP, it is more than likely that the customer’s UK bank would give a rate similar to that which the FX firm (who might only deal in Botseanan Pula for that one conversion) could get. The economies of scale which underpin the business model of the deliverable FX world wouldn’t benefit the client here because their FX deal in so little that they couldnt offer an improvement to the margin. Interestingly…a number of FX firms celebrate the wide range of currencies they ‘deal in’. ‘'Special FX' deals in 173 global currencies!’. In actual fact though, Special FX probably holds accounts in a fraction of those 173 currencies. If there customers are in the UK and are only selling/converting GBP, then Special FX dont need to actually hold any of the other currency accounts themselves, because they’re not receiving any of those currencies. Countries like South Africa can be tricky to deal with when it comes to moving money internationally. This is surprising particularly when you consider that the IMF and World Bank have recently labelled them as a developed economy (I am sure that is not the correct term, but it is something like that). The residency status of the client, the amount they are moving, where they are domiciled and the purpose of the transaction are all taken into account when trying to move funds from SA. Fundamentally these criterion determine whether the institution holding the clients Rand (ZAR) are at liberty to electronically transmit ZAR, or whether they arbitrarily convert them into a different currency and then send them to the beneficiary. This post consists of a number of little segments because, for the most part, our understanding of currency controls and the information we can pass on to you is mainly determined by anecdotal evidence. The fact that one doesn’t have much in the way of technical information to pass on is probably indicative of the fact that it is uncommon to deal in currencies that have these types of controls. Sending money to a country like India can be terribly terribly tricky. Whilst it may be useful for me to say it is ‘terribly tricky’ because it could prompt you to look into it further, it probably isn’t at all useful for us to be so vague…however, we have no choice. We are told by peers and contacts in payment despatch and compliance that funds can take up to two weeks to clear in an Indian bank if they arrive at all. It may be two weeks before the recipient bank acknowledges that you’re trying to pay a customer of theirs and they ask you to supporting information. It is a long a drawn out process. So inconsistent are the rules for sending payments from countries like India, Kenya and Malaysia, that savvy 'internationalistas' have found a number of ways to circumvent regulation. We are not advocating this and, frankly, we don’t actually know how it is done, but if it became apparent that one were dealing with a Malaysian resident, one would not be surprised to receive funds for a conversion denominated in Singapore Dollars. Likewise, I know of businesses in the UK that do their own sort of Transferwise set up….if they’re working with a supplier with activities in India the UK firm pays the UK company and the Indian side of the suppliers business makes good on the settlement of the pay in country. The general rule of thumb when it comes to currency controls and sending money internationally is that you need to be realistic about what using a foreign exchange specialist will actually achieve for you. You may very well find that your headache is only made greater by trying to incorporate a third party, like an FX broker, into the process. Bear in mind also that the mere fact that a broker does not deal regularly in a rarer or ‘exotic’ currency means that their ability to undercut a banking institution is in fact undermined before the get go. You might even be charged extra by your broker because they know how few other options you have. Most emerging market and developing economies will be just as ready to receive US dollars, euros or even sterling so be prepared to ask them whether this is the case. They will either use a set or ‘pegged’ rate to tell you how many Vietnamese Dong or Myanmar Kyatt you need to send, or they will simply invoice directly in USD as the Chinese do. In fact, China is exactly the example one should use to explain about currency controls. They want to be dollar rich. Now, the buoyancy of their own local/domestic currency has been a source of much discussion of late…as has their ability to floor the market with the USD they hold…but, fundamentally and for all these reasons, currency controls are not the policy of a developed or free market economy. #free #market #currency #controls #currencycontrols #centralbank #kenya #Botswana #Myanmar #China #USD #GBP #EUR

Our client is an executive at one of the worlds top accountancy firms. He and his fiance plan on marrying abroad. Since March of 2014 they have been drip-feeding sterling into a euro account they hold with Lloyds bank. The rate being good or bad doesn't really have too much of an effect on whether they convert, although they are in touch more so when sterling is stronger because, well, why not? They need to convert regardless of where the market sits because they obviously have a deadline by which time they need ‘x’ amount of euros to pay suppliers for their wedding. When one sends a payment with one’s bank one is charged both an up front fee and a percentage fee which is deducted from (or rather incorporated into) the rate of exchange provided by one’s bank. There is nothing untoward about this. It is exactly like paying to be a member of a group that gets discounts. You are paying your bank to use their service and they are also marking up the cost of the ‘product’ when you purchase and it can be the case that the more you buy, in terms of both frequency and volume, the better the terms you are offered. This is the principle that Prime Cap also makes use of…and is the reason we can offer better rates to our customers. One of the key things to remember is that in precisely the same way as you might shop around on the high street for a domestic appliance you can shop around for your pound or your euro or your dollar. Different companies and banks will have different structures that allow you to save on the cost of sending a payment and converting one currency into another. The banking sector varies. Some banks charge nothing but give a poor rate of exchange or the payment takes a while to arrive at its destination. Other banks charge you as much as £30 and it still takes a while to arrive at wits destination. Some banks apply only 0.75% to their exchange rate, others 3.5%. It really does vary so tremendously that one wonders how one’s bank arrives at its charges…especially when you are already using them for all your other financial bits and pieces. Our customer above is being rather clever though because he is exploiting Prime Cap's pricing structure to ensure that he pays far far less then he might otherwise. He is benefiting not only from the competitive rates we provide, but also a pricing mechanism that means his fees are far less. At Prime Cap we charge a customer a flat fee for the processing of a payment - £10. We offer our clients a number of different ways to send their money. Depending on the bank I am using to send my payments from (and I can use whichever bank I have an account with) I can offer my client access to more than one payment network/option. In this particular case I use ‘SEPA’ (Single European Payments Area). If sending money within SEPA the costs to a broker like us are far far lower; a fraction of the cost of using other methods like TT (telegraphic transfer). So, by electing to send money to their euro account using SEPA my client avoids any other fee. You may not think it a lot saved…but, if you consider that my client has made 14 payments since March 2014, then, by using SEPA and sending smaller amounts they have saved themselves well over £245 on fees from us, £133 on fees from Lloyds and (on the basis that they send no less than £1000 per transaction) approximately £500 when the rate of exchange we offer is compared with that of their bank. To arrive at this estimate we multiplied £1000 by 14 (amount by frequency). 1% being £140. On average we can shave 2.5% off the rate of exchange applied by a bank like Lloyds (conservatively) which equates to £490 left in our customer’s pocket. Our customer has over £500 more to spend on their wedding abroad because they used what is a very simple system to their advantage. It is equivalent to a nice cake or 100 €4 bottles of wine. Sending a payment by SEPA does not guarantee that their money arrives at its destination the very same day. Invariably it does, but it is not guaranteed, so we must concede that the system applied here fitted well with the customers wants and requirements, but would not be suitable for someone who wants to get money abroad the very same day guaranteed. Want to know if we can help structure your overseas wedding payments...pick up that phone and ask us! 02031728193 #wedding #overseas #PrimeCap #Lloyds #Rates #foreignexchange #payment #EUR #Europe

If you are a private client who wants to use a foreign exchange company to convert a foreign currency into pounds sterling (GBP) and to credit those funds to a GBP denominated account in the UK then here are some guidelines as to what you should expect, indications as to some of the questions you will be asked, and pointers as to how best to prepare for this undertaking. This post also covers how to handle simply dealing with a UK based broker when your money is anywhere but. REGISTRATION: Most individuals sending money for the first time do so on the back of a referral or recommendation from a friend or a trusted source like a solicitor or financial adviser. It can be an anxious time sending money off into the abyss to a company whose history, competency and authenticity can only be verified, for the most part, online or by word of mouth. When you are asked to register with a foreign exchange firm you should be equipped with certain bits of verifiable information as well as your own questions. For instance, you can ask who the company bank with and attempt to verify the authenticity of that relationship – there is genuinely no harm in calling the bank with whom a broker might pro-port to do business. You will be provided with their FCA registration or authorisation number via their website or an application form. In a practical sense (in terms of the way you might deal with the company) there is little difference between one being ‘registered’ and one being authorised…however, behind the scenes the authorised company will be more stringently regulated by the Financial Conduct Authority. They will have been vetted to a greater extent and their banking and best practice policies will be more rigorously overseen. You might take confidence from this, but it is unlikely to make any difference to the rate you will receive at the end of the day - the rate is determined by the front end operations. So, it is Prime Cap's relationship with our transaction partner that gives you the better rate. If you just called up to deal with our partners directly you would get much the same rate as your bank might offer. Many customers get swept up in comparing their currency company of choice purely based on the competitiveness of the rate. Bear in mind that until you become a customer there is very little stock in the indicative rate of exchange you are quoted. Once you’re registered you can ask to buy or sell at the rate quoted, hence you are likely to get a far truer understanding of how good or bad the rate is. If the rate is too close to your bank’s rate then you can be confident the company isn’t pricing it as competitively as they should. For instance, if your online banking platform tells you that the exchange rate is 1.20 and you see on Google that the rate is 1.25, the broker that gives you a rate of 1.24 rather than the one that offers 1.21 is the most competitive. It is a rule of thumb and your bottom line is that this whole process should actually be saving you money. Why use a specialist otherwise? You may be asked for copies of documents to verify your identity and your current residential address. This used to be standard and it would be more alarming if you weren’t asked for these because they are the means by which a company can electronically verify who you are - however, lately the advances in online data storage/mining and sharing between data collecting entities means that many FX businesses, Prime Cap included, can usually verify your details without the need for copies of things like passports. Bear in mind that when we refer to 'electronic checks' we do not mean a a credit check, as an FX firm doesn’t need to know your credit worthiness, but it verifies your public and statutory ‘footprint’ on a points based system. Sometimes you might score too few points and this can be because you’re a tenant and don’t handle the utilities for where you live, you’re not on the electoral role…or simply that your driver’s license address does not match your utility bill address thereby making the former invalid. If you wish to use an FCA regulated firm and/or a broker like Prime Cap then, sadly, these hoops must be jumped through. AMOUNT: Unlike when sending money out from the UK to a foreign currency account, when using a UK based foreign currency company you need to bear in mind that your overseas bank will, in effect, need to make an international payment in order to get your foreign currency to the foreign currency account of your broker. Invariably the above incurs a fee or more than one set of fees. It is rare that your foreign bank will ask you to pay all the fees deductible 'up front' and this is because they’re not the institution that necessarily applies all the charges. Imagine going to your UK bank and saying you want to send a payment abroad. They will normally charge you between £10 and £35 to do that and they will usually deduct that cost from your account rather than from the amount of money you want to send. Fair enough, but you need to make sure that this is the case when you are sending funds to the UK otherwise your broker may receive less than you thought you were sending. Also, not every bank in the world holds its own foreign currency accounts as a standalone institution. The way a payment generally works is that the currency you’re sending doesn’t actually leave the country in which it is used. Most big banks holds accounts in the major and indeed minor trading hubs of the world. For EUR it is Frankfurht, for USD New York, sterling London. If I want to send US dollars to South Africa, USD are not electronically wired directly to South Africa. They are credited to the USD account held by the South African bank I am sending to; their USD account is either held at their branch, or with a different bank, in New York and then paid out from the corresponding ZAR account of that SA bank, domestically. In some instances the foreign bank you want to pay might not actually have their own branch in the country/currency you’re paying. So, this SA bank might only hold a USD account with another bank in the US. They hold an account with another bank which, in turn, credits them in their own currency. So, in a number of different instances you may have more than one bank performing routing services for another. Unfortunately this can leave you vulnerable to fees being deducted from the amount being transferred…because the intermediary banks involved aren’t going to inform you of their fees prior to you sending funds. Their communications structure that exists between banks does not work like that. Now, when one is sending money to a far flung account or even just one in the US (for instance) one can get a quotation on what amount of routing costs might be deducted from a payment and, on the clients acquiescence, one can pay to cover those costs at source, thereby ensuring that the full amount being sent arrives with the beneficiary. This is not really possible in the same way when sending money to the UK or to your currency broker because you don’t know which banks will be involved in the transmission/routing. You can’t be certain, beyond a reasonable measure, that the full sum will arrive at its destination intact. This tends to be why FX companies ask you, when sending money to the UK for conversion, to send money before you agree a contract for conversion with them. If you were to agree a rate and strike a deal and the amount of money that arrived was less than the contract stipulates then you find yourself in an embarrassing position. You can’t very well send a top up as this in itself would be subject to an additional fee too and it just wouldn’t seem worth it. So, you could send fractionally more than you want to convert and then work out, for future reference, what might be taken off. You might be able to ask your sending bank to ‘cover all fees’ but, in this broker’s experience, this can be misinterpreted and doesn’t always have the desired result. BANKING CO-ORDINATES: Once you have become a registered client of an FX firm they may well be happy providing you with details of the appropriately denominated client trust account for you to send your funds to. You won’t need the details until such a time as you are ready to send funds…but it can’t hurt to have them at the ready. On a slight aside: Fear not, an FX firm is not obligated to reveal anything to anyone about your tax arrangements, so, whilst it is unlikely you would even talk about that sort of thing with your FX broker, do not be put off using a non-banking firm because of any perceived declaration the broker might have to make. Your tax position, whether on or off shore, is your own business and a broker won’t need to ask you about that. Prime Cap has very strong ties to specialist international tax practices and practitioners...so if you would like some detail on that side of things then please simply ask your dealer when next you speak. To send a payment with the EU (at the time of writing) you will need an IBAN and SWIFT code from your broker. These are the two crucial pieces of information. Frankly, other than for the purposes of referencing the debit on your account, the name of the account you're sending your funds to isn’t even needed to successfully execute a payment to the UK. For brokers like Prime Cap you'll be sending funds to the account of our transaction partner. The account will be in their name and not that of Prime Cap, You would be well advised to put your own name or the unique client reference number you’re provided on registration as the reference on any payment you send. It is of course advisable to inform your broker as and when you make a payment to them and, if you are doing so through an online banking facility, take a screen shot of the execution page and provide this to the broker so that they can cross check it when they see funds in. CLEARANCE: Once your money arrives with a broker and, provided you are registered fully with them, they should be in touch to confirm receipt and discuss the rate of exchange at which they can convert your funds. Our online trading software will actually show you the balance held on account. You can straight away trade it if you want to, or simply call us to chat through the rate and what is going on across the markets. A broker won’t be at liberty to ‘apply’ your funds to their internal system until you’re registered, so, if you are not already fully registered with them, you won’t be able to convert funds prior to the completion of the registration process. Once the money is ‘in’ it is rather a simple process. You confirm the rate verbally or electronically with your broker. Your broker then buys the currency you want at the rate he quotes. Bear in mind that the contract the broker is using will tend to be a ‘SPOT’ contract unless you expressly want to be able to pay your GBP account the same day. Depending on the liquidity of the broker he may be able to pay funds out to you the same day or he may elect himself to execute a same day contract because he knows he doesn’t need to wait for you money to arrive. You provide him with the relevant banking details. They could be in the UK or abroad because although you have sent funds to the UK you may be buying a currency other than GBP and your beneficiary may not be in the United Kingdom. Just because your broker is located in London doesn’t mean that puts any cap or limit on his ability to deal internationally for you. #uk

‘Flight to safety’ and natty little phrases like it are bandied around frequently as a useful way of deflecting a question and as a means of not having to justify, at least at any micro level, what has caused a currency to move in the particular direction. Remember that FX dealers generally have no formal qualifications or qualified regulatory oversight when it comes to whats in their heads. They are not chartered analysts and do not hold diplomas that grant them any authority when it comes to assessing or commenting on market movements. Yes, an FX broker can advise you on the best contract to use to achieve your objectives, but they are no better placed than you to answer questions about where a rate of exchange may or may not move to. For that reason terms like ‘safe haven’, ‘risk aversion’ and ‘window dressing’ are excellent foils by which a dealer might, when questioned, appear more insightful that they are. It sounds so very cynical, but, that doesn’t make it false. Without much understanding of the broader concept, dealers use these phrases and others as a form of conversational padding. In the same way that using acronyms suggests one knows one’s onions, these broad terms in relation to the market are, if unchallenged, designed to put a distance between the dealers understanding and that of their client, even though it is more than likely that no such distance exists. So it is with the term ‘safe haven’. In a purely investmenty sense a safe haven is an investment that is expected to remain stable even at a time of particular volatility elsewhere in the market(s). It is worth noting though that safe haven is a relative notion. What is stable at worst and appreciating at best in one trading environment, may well be one’s undoing if the winds of sentiment change. It is not a sedentary vehicle per say, but it is a go-to and consistent instrument depending on the market conditions. If an entire economic sector is performing poorly but one company within that sector is performing well, its stock could be considered a safe haven. A 'safe haven currency' is by definition a currency which investors want to buy into and hold during periods of economic and political uncertainty. Gold is typically considered a safe haven asset when currency markets are volatile. United States Treasury Bills are also considered a safe haven even in a tumultuous economic climate because they are backed by the full faith and credit of the U.S. government. In the FX market, the Swiss franc is considered a safe haven currency. Liquidity is also a key issue when it comes to identifying a safe haven because you want to be able to buy and sell the currency with ease. This is arguably why USD is so appealing too. Holding US dollar gives you access to a supremely broad array of other assets by virtue of its status as the global reserve currency; it is in demand the world over and can be used the world over to boot. Consider, if you will, it's appreciation following the global credit crunch and market shock in 2008. GBP/USD was trading at 2 to 1 for quite some time prior to 2008 and throughout the United States’s middle eastern military engagements. Come 2016 USD trades at 1.50-/+ vs the pound even though that military deployment continues. The notion of war in this context has not actually dampened demand for the dollar because it is so widely used, if not prized, globally. Liquidity is an expression of the ease with which an asset or a currency can be moved, bought or sold. A ‘liquid’ asset is one that can be speedily exchanged and/or traded. There is demand and supply to such an extent that the owner of the asset can sell it easily if needs be. An 'illiquid' asset or currency is one with limited demand and supply. There is only a small market in which such an asset can be bought and sold; the term 'market' in this context should be imagined in the way that the word implies…literally a place to buy and sell goods, assets and services. The liquidity inherent to the US dollar affords countries with limited market access the ability to buy and sell things quickly and easily. These countries genuinely prize the dollar precisely because it affords them the freedom to engage with other global entities, whether corporate or sovereign. So, a safe haven currency is a predictable one. It is one with a stable government and somewhat predictable values. A growing and diversified economy is also characteristic of a safe haven currency. It is that diversification which gives the currency stability during times that might prove volatile for other currencies whose domestic economies are more singularly weighted. Whilst the vast majority of Prime Cap's clients need to convert and transmit a currency for a particular purpose, to pay for something or to move the currency back into the territory of their ongoing business/trading expenses, some private clients do not need to move or spend their currency and so elect to hold their money in currencies that have a lazier relationship with the wider global economy. We recently had a client who lived in Hong Kong. He moved back to the UK for work, but, has personal and family interests in Europe. Hence, the currencies on his radar were and are Hong Kong Dollar (HKD), GBP sterling and EUR euro. Our client had no immediate use for sterling. He was considering selling his HKD in to EUR in order to capitalise on what he thought might be a rise in the value of EUR denominate property in certain european cities whilst the UK negotiated is extraction from the EU. Given the strength of the US dollar and its tied/pegged relationship with the Hong Kong Dollar our client felt he had further incentive to sell HKD (notionally USD) into EUR because EUR was weak. Whilst Prime Cap's traders will never ever attempt to call the market, we do have opinions and are in a position to present commentary on the relative state of one currency against another and one economy against another. We identified that sterling was in fact weaker vs HKD than EUR. Brexit negotiations means the GBP could in fact weaken further in the near term which would advantage our client. Furthermore, should the UK emerge more attractive as a result of said negotiations...and, let's face it, the only way for GBP was up in the longer term, then the client could benefit for a stronger position against EUR. Yes, he might miss a gap in the Parisian property sector...a gap he thought he could take advantage of because individuals, investors and institutions were troubleshooting the outcome of Brexit...however, GBP was still weak against EUR...so those he thought might rally property prices were struggling to liquidate their GBP denominated assets, meaning he hadn't necessarily missed the crest of a wave as yet. It is also worth looking at the yield our client could expect were he to park his HKD in sterling or EUR. With interest rates supposedly due to rise in the UK (which in turn would bolster the value of the pound) it seemed likely he would get a more favourable savings return from GBP denominated instruments than he would from those of the Eurozone. Sterling is a safe haven despite political and economic uncertainty. An asset manager might have advised our client to do something all together different with his funds. Prime Cap's role is not to advise our client as to what instrument or vehicle might improve their wealth, however, we have partners who do this. Anyway, the overriding concern of our client was that whilst things were up in the air he wanted access to his funds. His assets needed to remain liquid. Many of the indicators we look at suggested that taking advantage of HKD's strength against the pound would achieve the desired liquidity and also leave him well place to operate in a rising market. Like so many in his position, particularly in the private equity space, our client is keeping his 'powder dry'. He is biding his time before popping his money into the longest term vehicle and he is choosing to use sterling as the waiting room precisely because it is a stable, in demand, liquid 'safe haven'. #economy #liquid #illiquid #liquidity #currency #US #USD #USDollar #safehaven #GBP #CHF #SwissFranc #powerdry #PrivateEquity #PrimeCap

At the begging of July 2016 we received this email from a prospective client introduced to us by one of their employees. The employee in question did and does use our services for their personal international payments - sending money between the UK and their base in Fort Lauderdale, US. This post relates to our response, what we suggested to the prospective clients, what solution we think they may elect to implement and why they may not choose to opt for a couple of our suggestions. From our (prospective) client: We manager a number of yachts and the crew’s payroll. While the yacht’s travel the world, generally the yacht pays wages in 1 currency, whether it be USD, EUR, GBP, and the crew have bank accounts all over. Some crew have inquired about currency brokers for better conversion rates. For example John Doe receives $10,000 per month, but his home bank is in Spain and denominated in Euros, and the bank just converts it into Euros at their rate of the day, usually not something very competitive. Are you able to offer a platform where we could wire their monthly wages into an account you offer, and the crew can login and transfer it to their home banks when they want? This is something outside the scope of our management agreement, so ideally I would like to refer someone for our crew to contact for situations like this. The problem outlined by this prospective client is a common one, but, dare I say it, this is a particularly compassionate employer as most would simply leave their staff to work this out for themselves. The currency ‘exposure’ is not that of the client (the yacht company) here because they are contracted to pay their staff in USD, so, aligning themselves with Prime Cap as their recommended FX broker is a conscientious add-on they may well be thanked for. An additional plus side for this prospective client is the potential revenue stream referring an FX broker could represent. We wrote not that long ago about the ethical issue we have over providing ‘kick-backs’ to affiliates who refer us business. In a somewhat contradictory manner we will go into why, in this instance, the commercial advantage this offers the client is what in fact cements the relationship and secures the business over and above the excellent service and supreme rates the client could expect for their staff from us. So, our very straight forward answer to this yacht charter/broker firm is ‘but of course, please do recommend us to your crew’. In this instance the crew register as individual clients with us. Prime Cap can receive funds either directly from the yacht company or from the personal USD accounts held by the crew member. Given that most of the crew members do not hold USD accounts we will likely find funds coming in directly from the employer. In each case we simply need something that confirms the whys and wherefores of the funds. Why, for instance, are they coming to us from a business who is not our client rather than from the individual who is. It is not that we are suspicious, it is simply that our transaction partners and regulators will want to make sure we know where the money is coming from. A contract, invoice or pay slip will easily satisfy us as to the probity of funds. Another way of approaching this question is for the actual yacht firm to register as a client of Prime Cap. This is the route we would prefer because the activities of this company may not be limited to sending out dollars for their staff. The yacht world sees a lot of foreign exchange payments, whether that be the buying and selling of the vessels or in fact their production and design aspects. These activities and facets can be spread globally. Here is our response to the initial email inquiry – it is long, but such is the nature of some referrals and the importance of a first impression that we may only have the one chance to address the concerns raised in the initial inquiry: First thing to say is that this is a very common situation for companies with staff who bank globally. We deal with this primarily in the legal sector when international firms pay in one single currency to their global staff, so this is familiar territory. My concern is that detailing my thoughts on your options isn’t going to be a short email. So, bear with me and if you would prefer to discuss directly then do give me a ring on +44 2031957136. There are a couple of ways of approaching this. At the moment your crews are bearing the brunt of both poorer rates and fluctuations in the rates themselves; although they will actually be benefiting from being paid in USD at the moment because of its relative strength. Your crews’ banks are the main problem. You paying USD to their foreign currency denominated accounts leaves the crew members at the mercy of their banks conversion rate and in fact the actual timing of the conversion too. We can certainly register crew members you refer to us. If they do not hold a USD bank account themselves they can collect all their USD (from you) in one place, namely our USD segregated client account, and convert it as they wish. If they want to be paid the moment their salary is transmitted then they can leave instruction with us to flip the USD into their preferred currency and we credit them same day. We would already have established with them the basis of the commercial margins we use in our conversions so they can be assured of the best rates and marked improvement over that which they bank currently offers them. By way of indication our rates tend to undercut most retail banks by no less than 1.5% and sometimes as much as 5%…so they will be operating within the slimmest of margins through us on the conversion… …Alternatively, and this is something that is becoming increasingly popular from a payroll point of view…setting put as a client and you instructing us to make USD equivalent payments to the various crew members is possible. It would not commit you to paying them a specific currency amount, but it would/could be an option you to offer your crews…for example: ‘would you like us to pay you the FX equivalent of your USD salary using our broker?’ or ‘would you like us to put you in touch with our broker?’. We have found most employees paid in the way you currently do opt for the former scenario because it is less hassle and they know their salary is paid consistently each month at a very competitive rate without them having to do anything. It places no extra work load on you and your team either – I do appreciate that you might want this to be purely something the individual crew members deal with though, so it may not be a goer. Following this message we were informed that the company involved wanted to remain at arms length as far as the conversion of currencies was concerned. This basically means that the individual employee would be the client. Practically that might mean a little more work on the compliance and registering side of things, but in terms of an addition to our portfolio Prime Cap tend to think a private client is ‘worth’ more to sales propagation than a corporate client. We did not bring up the notion of paying a referral fee to the yacht company for their endorsement of our services. We have little doubt that, had we mentioned it and offered a profit share, they would have agreed. Why wouldn’t a company take you up on an offer to pay them for business they put your way? But, the reason we did not offer this type of incentive is because the yacht firm already had a solid recommendation from one of their staff members. It could have been seen as a conflict of interest if they, whilst electing to not ‘get involved’ in the FX, then profited from the referral. So, the focus of this post is the fact that, no matter how elaborate the business structure or how broad the variety one might see in the business that could come from it, using a specialist firm can in fact serve your staff very well. It doubtful whether many FX companies get asked about how best to convert the salaries of their corporate clients' staff. Corporate clients tend to ere on the side of it being the concern of their employee personally, and the employee probably doesn’t think to look into it…but it is a rich vein of business for us and we are always on the look out for conscientious HR and accounts departments who want the value add for their teams. #yacht #salary #payroll #internationa #currency #USD #EUR #France #Florida #convert