10 Questions to Ask a Currency Broker (To Get The Best Deal)
Most people are aware of how expensive banks are when it comes to overseas payments but many still continue to use them. The reason for this is that when it comes to large sums of money, people do not want to take chances. Banks are considered to be reliable and their transfer processes are relatively straight forward.
Although currency brokers don’t tend to have the brand awareness to compete with the likes of Bank of America or HSBC, the majority of them are very reputable businesses with credit ratings on par with banks. Anyone looking to make a bulk transfer abroad should certainly consider using a currency broker – the savings can be too large to ignore.
When comparing the market and deciding upon which broker to use, it is worth asking a broker the following questions. The more positive responses you receive, the more confident you can feel that they are going to satisfy your needs.
- Are you authorised and regulated by a financial authority?
In the UK, financial institutions are overseen by the FSA (Financial Services Authority) and it is important that any broker you consider is authorised and regulated by them. Any company that is, will have met stringent criteria and will therefore be suitable for using.
If you are transferring funds using a company based in another country then make sure they are regulated by its relevant body.
- Where do you hold client funds?
When you take part in a transfer, you will be required to send the broker your funds and it is important to know where this money is kept. Any reputable broker will have a designated bank account where client funds are store, separating them from the account that the business uses to pay for its day to day running costs. Some brokers in the past have not kept these funds separate and have been known to trade on the markets with their clients’ money. Such institutions should be avoided at all costs.
- What is your Credit Rating?
The credit rating of a broker is a key indicator of the trustworthiness and stability of the company. Ratings range from AAA to D with AAA being the best. Moneycorp is one of the biggest foreign exchange specialists in the world and is both AAA rated and ISO9000 compliant.
- Do you have Professional Indemnity Insurance?
Professional Indemnity Insurance protects individuals in the event that a broker’s employees take part in fraudulent activity. If you are dealing with large sums of money then it is definitely something you should consider asking.
- What Spread are you charging me and what fees will I incur?
The spread is the difference between the rate the broker will pay for the currency you are requesting, and what they sell it to you at. This figure tends to be discretionary with specialised currency exchanges so make sure you barter. Larger companies will get currency at a rate very close to the Interbank rate so the difference between this and what you are offered will constitute the spread. Banks tend to work differently and fix their spreads so there is no leeway on what they will offer people.
- How long have you been in the currency exchange business?
The longer the company has been offering foreign transfer services, the more stable it will tend to be. If a company is less than three years old then we would suggest avoiding it. There far too many alternatives with extensive history for you to consider instead.
- How much currency does the company exchange each year?
Top exchanges tend to turn over huge sums of money each year and it is a case of the more the better. The higher the turnover, the more transactions they are likely to facilitate and the more stable they are likely to be. If a company facilitates above 500 million then it is worth considering not only because it will probably provide a better service, but because they will be more likely to offer a better rate due to the volumes they transact.
- Is it free to open an account?
Some cowboy firms have been known to charge clients for opening an account with them. Steer clear of any brokerage that doesn’t provide you with a facility free of charge.
- What documents do I need to provide to open an account?
Depending on your circumstances, you might be required to provide personal identification and supporting documents for your exchange, depending upon the currency you are looking to purchase and what country you are attempting to send it to. By asking what information a broker requires, you can make sure you are fully prepared.
- How long do transfers take?
Brokers can vary with the time they take to send funds overseas. You shouldn’t expect for a transfer to take more than five working days to hit your overseas account, no matter what country it is in.