(This story is sponsored by Shift Connect.)
As the world of business grows increasingly borderless and our everyday interactions expand on a global scale, our finances are doing the same. Individuals and businesses are transacting across borders more than ever, from buying and selling goods to sending and receiving funds from across the globe, our reach is ever-expanding. Whether or not you’re aware of it, there’s a good chance that you have some relationship with the foreign exchange market, particularly if you are a business owner or a frequent traveller. While this opens up an entire realm of possibility, it also opens you up to risk in the face of fluctuating currencies, hidden fees, and steep exchange rates.
If you’re unfamiliar with foreign exchange, commonly referred to as “forex,” here’s a simple breakdown.
“Forex, short for foreign exchange, refers to the conversion of currencies. The foreign exchange market is the largest, most liquid market in the world. Forex is often misinterpreted as speculation however it is much broader than that. It is an essential component of international trade. Forex can be as simple as buying another currency for travel or a small purchase to complex long-term contracts involving multiple currencies and commitments,” explains Dave Kelcher, chief executive officer of Shift Connect.
If you are exposed to forex risk, this means that your regular transactions or your position in the market may be opening you up to potential loss. Gaining an understanding of the forex market is imperative, especially in today’s global economy but it’s also important to understand the many ways that you could be saving money on foreign exchange.
We asked the experts and here are a few things to keep in mind:
Say goodbye to banks
It’s crucial to remember that banks are, in fact, businesses seeking to maximize profits for their shareholders and their cross-border payment fees aren’t always favourable.
“Foreign exchange is one of the most profitable revenue generators for the banks. Their rates are generally uncompetitive unless you are a large multinational firm,” says John Hayes, Shift Connect’s chief trading and risk officer.
Independent agencies like Shift Connect can often offer rates that are far more attractive without the addition of hidden fees on either end of your transaction. This approach will also save you a whole lot of time and energy.
Practice dollar cost averaging
“Rather than trying to pick tops and bottoms of fluctuating currencies (which is nearly impossible), a safer bet is to average in with a few transactions rather than one bulk exchange. This strategy is dependent on volume traded and only makes sense for particularly large transactions,” says Kelcher. While this may sound complex if you’re unfamiliar with the market, partnering with a forex agency will offer you clarity and support every step of the way.
Partner with a professional
“Deal with a professional whose sole focus is foreign exchange,” advises Kelcher. “Forex dealers have a finger on the pulse. They can get to understand your needs and look to build a strategy to support you.”
Lean on a well-planned hedging strategy
“Depending on suitability, a well-planned hedging strategy can be used to save money and reduce downside risk,” says Kelcher. “Forex hedging is the process of mitigating the risks of currency fluctuations. There are multiple hedging tools that can be incorporated to reduce exposure and offer protection from losses. Forex hedging can be likened to insurance as there is a cost to adding protection.”
Shift Connect specializes in hedging strategies and forex risk management.
Look out for hidden charges
“Attractive exchange rates often come with hidden fees which make the overall cost less competitive,” says Hayes. “Be sure to ask a lot of questions and be wary of lacking transparency and unclear, jargon-filled answers.”
When it comes to forex, you want to be inquisitive and shop around. Be aware that there are alternative options to your foreign exchange and cross-border strategy than dealing exclusively with your bank. The posted rate at the bank is not the only rate. In fact, it can be one of the least competitive rates. Establishing a relationship with a forex specialist will save you time and money. Having a direct contact, or team of contacts, provides the assurance that your needs are being met in a timely and professional manner allowing for a stress-free experience.
“Shift offers unparalleled customer service and responsiveness. We are an agile company that prioritizes customer experience and satisfaction. We understand the pain points of trying to move currencies cross-border and are always striving to alleviate this challenge for our clients,” says Kelcher.
If you’re interested in partnering with a foreign exchange and global payment provider, Shift Connect is a Canadian agency headquartered in Calgary, Alberta.