David vs Goliath? Is biggest always best when it comes to sending money abroad?
As timeless as the Biblical tale of David and Goliath, many people still believe that larger foreign exchange companies will be better placed to provide competitive exchange rates than smaller competitors – but is that really true?
Robin Haynes, MD of Currency Index founded in 2008, examines whether biggest is always best when it comes to sending money abroad and highlights other differences in the marketplace that clients should watch out for:
1. Getting the best exchange rates
The foreign exchange market is extremely competitive, and has high ‘liquidity’ – meaning it is possible for currency companies to source rates from the market at very small margins. In practice, this means that any company trading in excess of a couple of million pounds per month, is effectively able to buy currency at very similar rates to one trading tens of millions or more per month.
For an individual or a business using a broker, that means, perhaps surprisingly, that often the rates offered by a seemingly smaller company will be just as good as those available from one of the market leaders. In fact, due to lower overheads, you can often obtain a better rate from a more boutique company, so it is always worth checking.
2. Customer Service
Smaller companies in any industry, by and large, will be more attentive to individual clients; as an example try calling your bank or mobile phone company and see whether you can get any level of decent personal service. The same can be said of a smaller currency company, with perhaps tens of employees instead of hundreds, as an individual account manager will take the time to get to know you as a client and work with your exact requirements.
This in turn can save you money, because you are more likely to be kept informed of market movement and the different options available for buying your currency. In addition, you may find your payment is sent more quickly, particularly if it is urgent, because a smaller company could me more flexible and able to accommodate your requirements.
3. Security
Any currency company which is FSA Authorised is obliged to operate safeguarded client accounts and hold a minimum amount of capital in the business. Therefore, there should be no difference in security of funds, whichever company you use for your international transfers. A quick check on the FSA website will tell you if a company you are using is Authorised (note – if a company is Registered but not Authorised then these safeguards are not obligatory).
The Acid Test
Putting the theory that biggest isn’t always best to test, a mystery shopper contacted three of the largest FX companies as well as Currency Index looking to purchase €150,000 to fund a home purchase in Spain. Below reveals the indicative rate she was offered at midday on 14th March 2012:
Commenting on the results, Haynes says:
“When considering buying currency, clients should research which currency company to use by speaking to a couple of reputable brokers, big or small, and ensure they are comfortable dealing with a particular individual and firm. Our Acid Test results show that it can also pay to make sure you don’t assume that bigger is necessarily better and to watch out for any additional fees or transaction charges.”
For more information about exchange rates and buying currency, contact Robin at Currency Index on 0800 043 2623 or visit www.currencyindex.co.uk.
Currency Index: Fast Facts
• OPP award-winning foreign exchange and currency service provider.
• Formed in 2008 by industry experts, Currency Index prides itself on providing individuals and businesses with a superior foreign exchange service and competitive exchange rates.
• Currency Index handles around £75m per year in client transactions making it a medium sized FX company
• Trust, transparency and professionalism are at the core of Currency Index with the company becoming one of the first currency brokers to become an Authorised Payment Institution under FSA regulations in 2009.
• Currency Index only employs the most experienced and knowledgeable staff to assist clients be they overseas property buyers, importers, exporters and any other company or individual looking to obtain money-saving exchange rates.