There are many reasons why you might need foreign currency: perhaps you are buying a house overseas, have investments in other countries or perhaps you want to send funds to family who are travelling or studying abroad.
Whatever the reason, it’s very tempting to simply pop down to your local bank to arrange the transfer. After all, they are a name you know and trust and can be counted on to do the best deal….right?
We take a look at the advantages you could enjoy by using the services of a currency broker instead and how you can make sure your money is safe.
Why use a currency broker?
Although banks offer foreign currency services, this amenity is just one of the many different facilities that they provide. Whilst this may sound perfect, a one-stop shop for all your financial needs, what it means in reality is that you won’t be accessing the most specialised knowledge.
Currency brokers don’t dabble in any other types of financial services which mean that they have a team of professionals whose expertise lies solely within the foreign currency market. Conducting countless numbers of transactions every day, they are true experts in the field and can provide valuable advice on the different options available to you.
But it’s not just the expert help and advice which is superior; you could save substantial fees by using a broker and also secure a more competitive exchange rate. Brokers are able to offer these because of the sheer volume of currency exchanges they carry out on a daily basis.
Despite the undeniable advantages of using a broker, you may be hesitant to hand over large quantities of cash to some-one who you have never heard of. Your doubts may be amplified by the fact that the vast majority of brokers operate online without a physical branch. Whilst this helps to keep overheads low and means you can access their help from the comfort of your own home at a time that suits you, you may be uncomfortable with the idea at first.
And of course, caution is not a bad thing; after all, simply passing a large sum of money to the first firm that offers you a good deal could be a huge risk.
Thankfully, there is an easy way to determine whether the currency broker you are considering is a legitimate company and safe to use.
What to check for
To make sure your funds are secure, you should only consider using a currency broker who is both authorised and registered by the Financial Conduct Authority (previously known as the Financial Services Authority). It is imperative that the company is both authorised and registered, simply being registered is not sufficient.
A currency broker who is both authorised and registered will have undergone many rigorous checks as well as being obliged to meet on-going audit requirements in order to maintain their status. Being registered simply means that some basic checks have been carried out, such as whether staff have criminal records and that the company is in business.
Grow your own money, save money on foreign currency deals through a currency broker
It is very simple to check whether a company has been authorised; the FCA register is free to use and available to the public. This database confirms the current status of any company and lists any restrictions that may apply; it can be found here.
As part of being an authorised firm, the currency broker will be required to hold clients’ money in a separate account and must not use this to fund any of its own investments or business operations. The FCA requires that the company holds a minimum amount of its own capital to become authorised.
Any firm which offers to carry out transactions without verifying your identity should be viewed with extreme caution as this is a fundamental requirement for all compliant organisations. If you are securing rates for use in the future, you should be asked to pay a deposit, typically around 10%. If you are not asked to pay anything at all or conversely, are asked to pay 100% you should think about finding an alternative broker. Whilst not being asked to pay a deposit to secure a fixed exchange rate might sound great, it is an indication that the company may be using other customers’ money in order to fund the transaction.
By following the above steps you can be certain that the currency broker you use will not just provide you with a great deal, but that your money will be just as safe as if you were using one of the high street banks.
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