How safe is my money with a FX company?

brodev

I am transferring some ten of thousands of £s to €s. The FX companies appear to offer the best rates. I am required to transfer from my £ account to them and then they do the exchange and transfer to my overseas € account. How safe is my money between leaving my £ account and arriving at my € account? What happens if the FX co. goes bust at a very inconvenient moment? It appears that Transferwise is the most cost effective company out there so, in particular, how safe are they?

benjus

brodev wrote: »

I am transferring some ten of thousands of £s to €s. The FX companies appear to offer the best rates. I am required to transfer from my £ account to them and then they do the exchange and transfer to my overseas € account. How safe is my money between leaving my £ account and arriving at my € account? What happens if the FX co. goes bust at a very inconvenient moment? It appears that Transferwise is the most cost effective company out there so, in particular, how safe are they?

You don't have much protection at all, really. I've only ever used FX brokers for sums of up to a couple of thousand, so I felt any risk was acceptable. Of course, it's much less risky than making forward trades (which is why a lot of customers of Crown Currency Exchange were bitten) because you're just talking about a spot transfer where the company will only hold your money for a couple of days or less. Can't comment on Transferwise as I haven't used them yet, although they seem to have very good rates and low fees even for small transfers, so you might be able to split it into a series of smaller transfers to mitigate the risk.


Alternatively, you might want to try talking to your € bank and see if you can negotiate the exchange rate they will apply if they receive a payment in £. Or try talking to your £ bank and see if you can negotiate a better rate for conversion to €.

RetiredInThailand

benjus wrote: »

You don't have much protection at all, really.

Make that "none".

jonesMUFCforever

Make that absolutely zilch.

catokelly

I advise you to talk to the FX companies either in person or over the phone, check their rates (ensure that there are no hidden fees etc) and ask them any questions that you may have. Check how long they have been trading, whether they have a high street presence etc, how long it takes for the payment to arrive to the beneficiary account, etc...

In the case of crown currency going bust, this was a solely internet based company that offered totally unrealistic rates which were sometimes better than the spot/interbank rate and they would sit on customers money for a minimum of 6 days or up to 1 year! Whereas most reputable companies will process and send the international payment as soon as the Sterling hits their account, which minimises any potential risk of them going bust in between getting your payment and sending the international funds.

benjus

catokelly wrote: »

In the case of crown currency going bust, this was a solely internet based company that offered totally unrealistic rates which were sometimes better than the spot/interbank rate and they would sit on customers money for a minimum of 6 days or up to 1 year!

I don't know much about the Crown Currency problems, but forward trading is nothing unusual in the banking world, and because forward rates are different to spot rates, they may well be better than the current spot/interbank rate.

brodev

Thanks all for your replies. I am slightly puzzled. Basically you all say that there is no protection at all. Why then should I, or anybody else, bother to look if the co. has FSA approval? Does the FSA not offer some protection?