How To Choose The Best FX Broker

Things You Need To Know Before Choosing An FX Provider

Finding Your Best FX Provider

So you’ve finally come around to the realization that your bank has been ripping you off for years, or maybe you’re not happy with the service of your current FX broker. And it’s time to find a new provider to handle your foreign currency. But there are so many providers out there trying to get your attention, and every one of them say that they’re the best. How on earth do you choose the best broker for you?

Well, it’s not as simple as picking the one with the biggest marketing budget. From the surface, all FX providers may seem pretty similar, but they all have differences that you should be taking into account when deciding which one to choose. So before you flip a coin, have a look at some of the things that you should keep in mind before choosing your international money transfer provider

How To Choose An FX Provider

What Factors Should Go Into Your Decision?

Business Or Personal?

This one is easy, are you an individual or are you making business transfers? 

Individuals tend to have less complex needs for money transfers. There are thousands of reasons individuals may need an FX provider. Investing in property overseas, sending money to family, or overseas education to name a few. Most of the time, individuals will be just looking for spot, or sometimes forward transfers, and for the best rate. 

Businesses on the other hand sometimes have a more complex requirement from their FX provider. 

Depending on your circumstances, you should look at whether or not a provider has a business account available, or just personal accounts. 

Exchange Rates & Fees

Rates and fees are the main ways that banks and FX brokers make their money. 

Fees are usually pretty easy to understand, and they’re usually pretty clear. You send $1,000 and they charge you a $20 fee. Simple as that. Some brokers will charge a fee on your transfer, but others may have zero fees.

So how do the companies with zero fees stay in business?? The answer is FX “spreads” or rates. The spread how most banks and brokers make their money on foreign currency transfers, and they can be a lot more difficult to calculate. To calculate what spread you’re being charged you need to look at the difference between the rate your broker is giving you, and the “interbank” rate. The interbank rate is the rate that the banks deal between themselves – it’s the one that you hear if you accidentally flip onto the finance channel. 

Let’s say you’re wanting to send $1,000 USD to EUR and your broker says they’ll give you a rate of 0.8500, and zero fees! Sounds good right? Maybe not… A quick Google search will reveal the current USD/EUR rate is 0.8815! This means that you’ve actually being charged $0.0315 for every dollar you send – that’s $31.50! 

Always make sure you check what rate you’re being quoted against the interbank rate. Even if your broker tells you they’re giving you the interbank rate – there can sometimes be discrepancies. 

TransferWise, WorldRemit, and InstaReM are some low-cost providers. 

Customer Support - Do You Want Personal Service?

Rates and fees might seem like your biggest concern, but from my experience customer service and support can cost you a whole lost more. There are a lot of low-cost providers popping up at the moment, and they can be a great option for some people, but try getting in touch with them if something goes wrong, and you might run into some problems.

It’s not just fixing problems that customer support can help. There is a range of reasons why you might want to talk to someone:

    • Trouble registering. There’s nothing more frustrating than a registration process that takes forever because there is nobody to talk to, to verify your documents
    • Sending large amounts. It can be daunting sending a large amount of money overseas online. An account manager can take you through the steps and confirm your transfer for you
    • Help and advice. While most brokers won’t give you direct advice, they can tell you about market conditions or other products that are available, such as forward contracts to book in a future rate
    • Canceling a trade. If you make a mistake on an online trade, it can be very difficult to rectify. If you act quick, an account manager can sometimes reverse or cancel a trade at no cost to you

There are many other reasons why good customer service could help you. Make sure you keep this is in mind when choosing a broker.

WorldFirst, OFX, and XE will usually allocate a personal account manager, who you can speak to.

Options, Forwards & Structured Products

Some businesses which are trying to hedge against foreign exchange risk or people who want to lock in an exchange rate for the future may want to look into forwards, options or limits. 

Options are usually only offered to businesses or high worth individuals with knowledge of the industry. A lot of the major players who use to deal with options have since stopped selling these products. XE and AFEX are some companies that still do.

Forward contracts lock in an exchange rate for the future, whereas limit orders execute a trade if/when the market reaches a certain price. These products are offered to businesses and individuals by some FX providers. They can be useful for budgeting for future purchases, or other things. It’s always good to chat with your financial advisor before making any decisions though.  WorldFirst, TorFX, and OFX offer forwards and limit orders.

FX is risky, but options are particularly risky when you don’t know what you’re doing. Please speak to your financial advisor before trading options. 

Where Are You Living

FX brokers can usually only onboard clients in regions where they are licensed. So that means that you may not be able to register for an account with certain FX companies, depending on where you reside.

It’s a good idea to check this before trying to register, as it can be frustrating to get to the end of a registration process only to get a message saying “Sorry, we can’t onboard clients from XX country at this time”. 

Where Are You Sending Money?

Make sure that the currency broker that you choose will be able to efficiently trade the currency pair that you want to trade. Due to different licenses and trading software that FX providers use, certain currency pairs will be easier or cheaper for certain brokers.

Things to check are:

  • Does the FX provider deal in the currency pair, eg AUD/INR?
  • What is the speed on transfer to this country?
  • What are the costs/are there any additional costs when dealing with this currency pair?

Reputation & Regulation

Not all International Money Transfer providers are licensed to operate in all areas, and it may not be wise to trade through an FX provider which is not regulated in your country of registration. 

It’s a good idea to check this before you register. CompareMy FX  does it’s best to only compare reputable and regulated FX providers. Make sure you only deal with reputable brokers. 

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