A study commissioned by foreign exchange specialist HiFX Australia has found Australians are losing millions of dollars each year on their foreign exchange transactions due to poor advice and a lack of planning.
The survey, conducted by market research company Galaxy, looked at a sample of 1,100 respondents, identifying those who had made a large foreign exchange transaction in the past two years.
Galaxy found that even with an estimated 600,000 significant transactions (i.e, valued at more than A$20,000) during this time, a limited number planned their transactions in advance or sought expert advice to ensure the best rate and commission deals.
Only 16 per cent of respondents sought out a professional foreign exchange adviser; instead, the most common sources for information were the media (62 per cent), exchange rate boards at banks and bureau de change (54 per cent), and family and friends (22 per cent).
Furthermore, only 2 per cent of those surveyed said they would go to a specialist foreign exchange house for large transactions, with the majority saying they would go to a bank.
Despite these findings, a market for consumers seeking access to professional advice and services was still determined with 82 per cent of people wishing that their currency transactions were easier and more cost-effective if available.
Director of HiFX Australia, Spencer Wilcox, said the survey confirmed that Australian’s were generally unaware of the potential benefits offered by specialist currency exchange services outside from banks.
These services included advice on timing, the ability to execute transactions at a pre-determined exchange rate, being able to fix a favourable exchange rate and pay later, and the ability to make regular payments at a fixed exchange rate.
“We’re not just talking about a few hundred dollars being exchanged at the airport, in some cases its thousands. Clearly, too many Australians are losing money in foreign exchange transactions because they don’t seek specialist advice. A lack of planning can result in poor choices, bad timing when transacting and exposure to uncompetitive exchange rates, charges and commissions”, said Wilcox.
He also pointed out that a mis-timed foreign exchange transaction could be very costly due to adverse currency fluctuations.
“Take the example of someone who accepts a job overseas for an extended period, and transfers funds such as the proceeds from the sale of their house, possibly hundreds of thousands of dollars. If the Australian dollar weakens even slightly at the time of the transaction, their savings will suffer.”
To mitigate the risk of this occurring Wilcox suggests an exchange rate guarantee (ERG), which protects individuals against adverse currency movements when transferring funds internationally.
“An ERG secures the right, but not the obligation, to buy your currency at a pre-agreed exchange rate for a future date. The future date currency rate is fixed now with payment of an upfront premium, similar to an insurance policy. On the date of maturity, the consumer then decides whether to proceed with the pre-agreed rate of the prevailing market rate- whichever is more favourable”.
