Transferring money abroad

Being prepared and doing your research can save you a lot of money when tackling the volatile foreign exchange market. Laura Parsons, of TorFX, explains how using a currency broker can help protect you from fluctuations in the exhange rates

One of the many things people who are planning to live in France have to consider is how they intend to move money overseas to fund their venture. Foreign currency exchange requirements vary from person to person, from needing to transfer savings or fund a French property purchase, to moving pension payments or wages overseas on a regular basis. Whatever your requirements may be, you’ll find that you can get more for your money by taking the time to do a little research.

CURRENCY FLUCTUATIONS

The foreign currency market is one of the most volatile trading platforms in the world, with exchange rates having the potential to move by as much as 10% in a matter of weeks. The list of factors which can influence exchange rate movements is nearly endless, with everything from a nation’s unemployment rate through to its weather having an impact. Economic reports, political developments and socio-economic concerns have perhaps the most significant impact on exchange rate volatility, with a nation’s currency typically showing patterns of climbing in times of boom and falling during periods of bust.

This level of uncertainty means that engaging in foreign currency exchange comes with an element of risk. If you move your money when the exchange rate you’re targeting is at a low point, you’ll get far less for your funds than you would if you made the transfer when the exchange rate was higher. As an example, in 2014 the GBP/EUR (pound sterling to euro) exchange rate shifted from lows of 1.19 euros per pound, to highs of 1.28 euros per pound. If you were buying a property in France and had £280,000 to fund the purchase, an exchange rate of 1.19 would have secured you €333,200. However, if you’d waited until the market moved in your favour, that same £280,000 would have been worth €358,400 – needless to say, that’s €25,200 more!

WHY USE A CURRENCY BROKER?

1. Better rates

Unfortunately, not even currency experts can predict how the market will move in the future. That said, they can assess market trends and offer guidance regarding both potential fluctuations and the best foreign exchange options for your circumstances. For that reason, taking a proactive approach to your foreign exchange requirements can be really beneficial and leave you considerably better off financially.

The easiest way to save money on your foreign currency transaction is to secure a more competitive exchange rate, but with so many transfer options out there, it can be tricky choosing the best service for you. Using your bank might feel like a simple solution, but leading currency brokers can actually secure you an exchange rate up to 3% more competitive. This can mean the difference of thousands, so it’s true to say that it really does pay to shop around. Earlier this year, the GBP/EUR exchange rate achieved a high of more than 1.42 euros per pound. While a broker would have been able to secure you a rate close to this level, a bank would have offered you a rate of around 1.37. On a transaction of £100,000, this would have been a difference of €5,000.

2. Lower commission and fees

As a general rule, banks tend to charge commission and transfer fees – reducing how much you get for your money. Currency brokers don’t levy any additional charges, so you can maximise your return. They can also keep you up-to-date on the latest market movements and currency trends with regular updates and provide expert guidance so you won’t miss out on a favourable rate.

3. Offer specialist services

Another benefit of using a currency broker to manage your transfer rather than a bank is that they can give you access to specialist services, such as the option of fixing a favourable exchange rate for up to two years in advance of a trade. This service is particularly useful if you’ve got a large transfer planned for the future (to cover a French property purchase, for example) and you want to safeguard the transaction from negative shifts in the market.

By fixing a rate when the market is favourable, you’ll know exactly how many euros you’ll achieve in the future, helping you budget effectively for your move to France and safeguarding your money from any adverse shifts that occur in the interim.

Some brokers also offer their clients access to a regular overseas payment scheme, which allows you to set up automatic monthly or quarterly transactions on amounts from £500 to £10,000 – perfect if you need to move wages or a pension overseas, or to meet mortgage payments. These regular transfers are conducted at a favourable exchange rate and without transfer fees or commission costs. Where banks can charge a transfer fee of anything from £10 to £40 per transaction, you could instead make a saving of as much as £480 over the course of a year.

There are a number of brokers out there but, for your own peace of mind, go with an established, FCA-authorised company that operates segregated client accounts for the provision of fund security.

www.torfx.comLooking to buy a property in France but not sure where to start? Read our French property buying guides for everything you need to know