How you could save 20,000 when relocating from the UK to any overseas destination!

Transcription

1 How you could save 20,000 when relocating from the UK to any overseas destination! By Charles Purdy International Payment Specialist

2 How you could save 20,000 relocating from the UK to any overseas destination! Many people and families have decided to leave the UK whether for employment reasons, to get closer to family members, for retirement or to seek a better quality of life. And why not?! Most people enjoy the idea of escaping the poor UK weather, the stressful pace of life, the political battles or the humdrum of doing the same old thing day after day. With a move overseas, you ll have the ability to embark on a new adventure and ultimately start a new and perhaps even more inspiring life. HOWEVER, the emigration process involves a multitude of steps and processes, many of which need to be examined carefully to ensure that you avoid problems and unnecessary risks. One particular step often gets neglected and can cause unnecessary stress and substantial financial losses. This step involves the simple act of making international payments especially if you fail to understand how the process works and how much you actually stand to lose. In the context of this special report an International Payment, is any payment that you need to make where one currency is exchanged for another and the exchanged funds are then transferred to an onward destination. For example making payments for an overseas property, rental payments, fees associated with re-locating to the overseas country or to move some of your savings from your UK bank to an overseas bank - these all qualify as international payments. CAN $ CHF US $ NZ $ AUS $ (FRN ) for the provision of payment services. (Page 1 of 10)

3 The International Payment Process It s all about WHO you use The International Payment process is straightforward. However, depending on WHO you use to undertake the process will determine the amount of money you save or lose. If you go directly to your bank as opposed to an International Payments Specialist to exchange and move your money, you could pay up to 4% more due to poor exchange rates alone. On each 100,000 that s an extra 4,000 more paid for an international transfer for absolutely no reason. Furthermore, you could lose even more money by failing to plan a currency strategy weeks, if not months, in advance. To emphasise the main causes of financial loss, let me repeat myself Large loses occur for two main reasons. One is buying currency at an uncompetitive exchange rate and the other is failing to make plans early enough. Although you may not need to transfer funds for a few weeks, a month or even 6 months, the earlier you understand your options and create a strategy the more likely you are to save money. It was reported in The Sunday Times (5 Feb 2007), that: Britons buying property abroad could have lost out on up to 1.8 billion because of high-street banks offering such a poor deal on foreign exchange, according to new research. In most cases, people like you who are moving overseas (rather than just buying an overseas property) will have lost out on even more money as they not only move funds for property, but often move their entire savings to their onward location! Carry on reading as I ll explain: - The full process involved in making an international payment so that you can clearly see where and how loses can occur - The specific differences between using a bank and a specialist so you know how to win rather than lose at the international money transfer game - How financial organisations charge for currency so that you can ensure you re not getting ripped off - The nature of exchange rates and how they change every second so you re better able to buy at a better rather than worse time I ll then move on to demonstrate how one couple saved 20,000 when relocating from the UK to an overseas destination followed by all the options you ll have regarding international payments. Additionally, I ll include a step-by-step explanation as to how the process works and what to look out for when selecting an International Payment Specialist that will best suit your needs. (FRN ) for the provision of payment services. (Page 2 of 10)

4 Quick Comparison: Bank vs. International Payments Specialist As mentioned already, using a bank rather than an International Payment Specialist will cause unnecessary losses. To give you a direct comparison between services, please review the table below. I will then go on to explain why there is a difference in services and demonstrate examples of how and where you will be able to save money. COMPARISON BANK SPECIALIST Rate of exchange Can charge up to 4% more for currency than what a specialist would charge (e.g. You could be charged 4,000 extra for 100,000 worth of currency) Can supply exchange rates at a saving of 4% less than what the banks may offer Availability of options One option on offer the option to buy currency at an uncompetitive rate with additional transfer charges Service on offer - No dedicated trader - No direct phone line - No specialist - No educational information - No strategy planning Safety of funds Transfer times Problem resolutions Receiving fees If using a bank in the UK to transfer funds, they guarantee only up to 50,000 Up to 5 days from receipt of cleared funds Contact complaints officer and get passed from pillar to post UK bank will often make little to no effort to minimise or eliminate the fees imposed by an overseas bank A variety of options: - Buy currency now and pay for it later - Order to buy get your trader to buy currency if the exchange rate hits a rate you agree to - Hedge strategies buy some currency now and the balance later - Dedicated trader - Direct dial phone line - Dealing with specialists - Daily, weekly currency notes - Strategy planning If using a service backed by a bank in Ireland, in addition to the guarantee of 50,000 the funds could be 100% guaranteed by the Irish government 1 to 2 days from receipt of cleared funds Contact dedicated trader and they will sort out any issues immediately Specialists will always make an effort to enforce the laws ensuring that receiving fees are eliminated or minimised as much as possible Okay by now it s quite obvious that using a specialist will warrant better exchange rates, provide more options and give an overall improved service over a bank. But how do specialists give better rates where do they make their money? Let me explain: (FRN ) for the provision of payment services. (Page 3 of 10)

5 How can specialists offer rates that are better than the banks? First it s important to realise that rates of exchange change every second as currency gets traded on the market. The euro exchange rate to the could be at 1.12 right now and in a few hours it could be at 1.13 or perhaps This means that buying 100,000 worth of euros could give you 112,000 but within the course of a day it could be 113,000 or perhaps 111,000. Exchange rates constantly change due to a variety of factors including supply and demand, announcements in the news, the political stability of a nation, reports releasing economic data and even the speculation that something might happen in the future (e.g. a rise in interest rates). So - taking the ever-changing nature of currency exchange rates into consideration, UK banks set their exchange rates in the morning with an ample buffer-zone. To ensure that they don t lose out, the bank sets a wide spread between the rate that they buy money for and the rate that they sell it to you. This means that they create a cushion or gap around the interbank rate (which I will explain shortly) that allows the rate to move yet, no matter what the rate they offer, they ll still make a profit Interbank Value 1.06 Bank rate to sell you euros Cushion (margin) created by banks to ensure that no matter what they sell for, they make a profit Currency specialist organisations, on the other hand, are different from banks in the fact that they do not set their rates at the start of the day, but call into the currency market for the client to get the best rate at the time. Because they are working with live rates, they can get much closer to the interbank value allowing clients to save thousands Interbank Value For a 1,000, you d get: 1.09 Currency broker rate to sell you euros 1,090 (in your hand) 1.06 Bank Rate to sell you euros 1,060 (in your hand) Let me explain quickly what the interbank rate is This is the rate you ll find in the newspaper, on the news, on Teletext and on most currency related websites. This is NOT the rate that you should expect to get - many people fail to understand this fact. (FRN ) for the provision of payment services. (Page 4 of 10)

6 The Interbank rate explained The interbank value is the price banks trade between themselves when they re moving millions. The interbank rate will give you an indication of where the rate is and what direction it s moving in. As a rule of thumb, below are the differences between the interbank rate and what you should expect to pay when purchasing currency from the below institutions: - Banks they ll charge you up to 4% more than the interbank rate for popular currencies such as the euro and US$, and up to 9% for less common currencies - Currency Brokers up to 1% more than the interbank rate - if you use a currency exchange specialist that does NOT pay their traders on commission - Credit Cards up to 7% - Airport Currency Shops could be as much as 10% - 15% As you can see, currency brokers offer the best rates because they tack on the lowest margin! Let s look at an example of how a couple saved 20,000. The 20,000 Savings Before reading, please keep in mind that this example applies to any currency. I ve used a case study that involved the purchase of euros, however it could just as well be a purchase of US, New Zealand or Australian dollars or any other currency. Mr & Mrs Goldberg decided to sell up in the UK and move to France. During their emigration adventure, they sold their home in the UK, purchased a property in France and moved all their money and assets across the channel. In the process of moving their funds, they saved 20,000 through using an International Payment Specialist. The savings can be broken down into three categories: 1. Getting exchange rates from a specialist that were 3.4% better than what their bank offered 2. Working with a specialist to create a strategy to buy at the best time 3. Learning how to minimise fees and charges (imposed by the banks) Let me explain how each of these savings occurred in more detail so that you can work with a specialist to hopefully replicate the process with your own international payments: (FRN ) for the provision of payment services. (Page 5 of 10)

7 The 20,000 Savings (continued) 1. Better exchange rates. All-in-all, the Goldbergs transferred a total of 425,750 from the UK to France. The funds came from the sale of their property and their savings. The total amount of euros they were able to purchase over and above what the bank would have given them was substantial: Amount saved by using a specialist (on better than bank exchange rates) = 14, Buying at the Best time. When the Goldbergs initially called an International Payment Specialist their trader explained that there was a possibility that rates would improve in a week or so. The specialist explained that no one ever knows what s going to happen, but if the Goldbergs had a bit of time it might be worth it to hold off and see if the rates improve. Due to the fact that the Goldbergs signed-up very early with a specialist, they had plenty of time. Within 3 weeks, the exchange rates improved, allowing the couple to get 5,020 more euros than if they simply purchased on the day that they called. If the couple rang a bank it s almost certain that the representative would have failed to offer any market information or any alternative option other than offering to sell currency on that day. Amount saved by using a specialist to plan a strategy - 5,020 A further very important note about buying at the best time. Sometimes, the best time might be right now. Imagine having to transfer 100,000 worth of any currency and the news is reporting that the rates are at an all-time best. Then imagine that you don t have the money available to buy your 100,000 worth of euros or US or New Zealand dollars. Most people would just pray that the rates stay as they are until their funds are available. Well you don t have to pray! Payment specialists offer a service that allows you to buy currency now and pay for it later. You ll need to put down a small deposit to secure an exchange rate, but once you make the call, speak with your trader and order the money, you can sit back knowing that the cost of your currency won t change. Talk about peace-ofmind. This option is called a Forward Contract, and I ll explain it further in the next section. 3. Learning how to minimise fees. Banks will always charge when making international transfers whereas international payment specialists will eliminate them if possible. If the amount being transferred is a reasonable amount, say over 3,000, most specialists will have no charges at all. For larger transfers of say euros and US dollars, the specialist organsiation may be able to remove all receiving charges. Amount saved by using a specialist to minimise bank fees (FRN ) for the provision of payment services. (Page 6 of 10)

8 A Breakdown of International Payment Options Available Option 1: Buy A Lump Sum of Currency Needed Now (or soon) In the currency specialist world, they call this type of transaction a Spot contract. Once the better-than-bank currency rate is quoted by a currency specialist and agreed by yourself, the full purchase amount needs to be paid in full within two to three working days. The payment can be achieved by simply instructing your bank to do a transfer and they ll move the money into the currency organisations Client Account. Once the money is in the Client Account, the specialist will then exchange it into the currency that you have bought and transfer it to your designated location overseas. The whole process is easy and seamless. Option 2: Reserve Currency for a Later Date at a Fixed Rate (buy now and pay later) You may want to consider this option to ensure against any unexpected changes in the price of your currency. Imagine having a budget set at 25,000 for a payment and, due to a change in exchange rates, the cost goes up to 30,000 This happens far more often than people think and represents a 5,000 LOSS; something that could have been prevented. The markets can be quite volatile and pose a real threat to the cost of international payments. If there is an indication that a future cost may be higher, it s sometimes better to fix the rate now. This will allow you to formally fix your budget and know that you re avoiding a potential increase in the cost of the transfer. This type of transaction is called a Forward. It allows you to order currency at an agreed fixed rate for up to several months in advance. You have the option to fix an exact rate to be transacted on an exact date OR you can agree a fixed rate with an agreed final date (i.e. you can pay for the currency at any time before that date). In order to secure the rate, you only have to pay a small deposit (5% - 10%) within two days of agreeing to buy the currency. The money is then held in a Client Account with the currency specialist s bank and the remainder is paid when the transaction has been set to complete. Option 3: Order Currency when it hits a Rate that you Designate This option is for people who don t necessarily need to move money over at any particular time. Perhaps you know that you re going to need money sent to your overseas location at some point in the next few months you can talk to a currency specialist and they can discuss an achievable rate that works to your benefit. Once the money market hits the pre-determined beneficial rate, the currency specialist will aim to buy the currency for you. When looking into this option, it s called an Order to Buy. (FRN ) for the provision of payment services. (Page 7 of 10)

9 The Process involved in using an International Payment Specialist The first thing you need to do is to open an account with a specialist. This can usually be done online, involves no cost or obligation and takes about 5 minutes. You ll be asked to supply your contact details, date of birth, reasons for your international payment along with questions on the amount and type of currency. Once all your information is received by the specialist organisation, they will do their required Anti-Money Laundering checks and follow FSA dictated procedures. Shortly thereafter, your account will be live and you can discuss your requirements with a trader. The rest of the process will look something like this: Your trader will quote the rate and the cost of currency for the amount required (if you choose to purchase currency that day) If you verbally agree to accept the quote, your trader will purchase the currency Internet Banking Transfer (no charge, but takes 3 days) Cheque in the Post (no charge, but takes 5 days) By end of the day, you will receive an invoice along with instructions (via ) on how to make your payment You will then need to send funds to pay for your deposit or currency purchase, and notify the specialist by , fax or post as to the location of where you want to send the funds Same-Day Bank Transfer (your bank may charge for this service) Faster Payments Transfer (no charge, but takes 1 day) Once funds clear in the specialist account, they are sent to the overseas beneficiary bank and arrive within hours. Funds are then allocated to the individual beneficiary account Most International Payment Specialists will confirm, via , to you that they have sent the funds. Whilst all specialists can make sure that the funds arrive with the receiving bank quickly and efficiently, unfortunately they cannot control the speed at which the bank allocates them to the individual account. Depending on the country that you re sending funds to, the allocation to your individual account could take hours or days. If you ever experience any issues, your International Payment Specialist can supply you with an advice note proving that the funds arrived at the overseas bank. (FRN ) for the provision of payment services. (Page 8 of 10)

10 Choosing the best International Payment Specialist International Payment Specialists offer the same type of contract and exchange options and they all buy money from the same market. And since the industry is heavily regulated, they all follow similar procedures; however the quality of the service can vary widely! Use the following as a tick-list to help you choose the best one: Do they charge some kind of set-up (upfront) fee? There are a few that do this, but the majority do not. The only thing you should pay for is this: o the money (at the agreed rate) and the transfer fee imposed by your bank o the fee your overseas bank might charge to accept transfers; and o an admin fee for transfers under a set amount (e.g. under 3,000) Is the organisation authorised by the Financial Services Authority under the Payment Services Regulations of 2009 for the provision of payment services? Are they regulated by HM Customs & Excise and a registered UK company? Do the currency traders make commission on selling you currency? If so, keep in mind the possible conflict of interest in that their motive might be to take a large margin to line their pockets rather than offer you the best rate. Do the company representatives and literature received from the organisation make the process simple and give you all the information you need? While talking to the representative, does it sound like someone that is simply doing a job or does the representative give you the feeling that they re going to have your best interests at heart? Does the company appear to spend a substantial amount on fancy brochures and advertisements? This often is an indication that they have high overheads and have to get higher margins from their clients to pay for their advertising. Does the company offer helpful resources such as weekly currency updates or educational reports? Can the organisation set up an account quickly within hours? Some organisations take days and even weeks. When asking the broker about rates or the market do they come across as knowlegable and talk in terms that anyone can understand rather than financial jargon? Does the specialist organisation make sure your money is secure? The key is to feel good about the organisation and the trader you re dealing with. You want to ensure that your money is in safe hands! (FRN ) for the provision of payment services. (Page 9 of 10)

11 Choose Smart Currency The International Payment Specialists I truly wish you the best with your future plans to emigrate. If there is any way my colleagues or I can assist you on the currency exchange side of things please give us a ring at Smart Currency Exchange Limited on (free phone) or visit our website at: Why Use Smart Currency Exchange Limited? Smart Currency Exchange is the UK s leading International Payment Provider. Smart offers: - Better-than-bank rates - No charges, no commission and no fees (over 3,000) - Funds are secured in separate client accounts - Easy account application and trading process - Accounts can be opened in less than 2 hours - Traders are not paid on commission - Free currency account and consultation - Weekly currency and strategy reports To Apply Online, go to: or Call (free phone) " in choosing and using Smart Currency Exchange, I saved around 4K over the exchange rate offered by my Bank at that moment in time, which will permit the installation of a new kitchen in our property. Tony & Assia Green "Smart Currency was very helpful with our dollar exchange to purchase a property in Florida. It was easy to contact them by telephone or and they kept me informed of the progress of the transfer. They also saved me 5,000 compared to the rate offered by my bank." Lesley Smart (no relation), Dalkeith (FRN ) for the provision of payment services. (Page 10 of 10)