Currency Broker in Mallorca – Top Tips for Spanish investment
Security and regulation have never been so important in looking for a new currency broker in Mallorca. Your currency broker should, be Financial Conduct Authority regulated, have segregated accounts for your money (which keeps it separate from their operating capital) and have a great track record and reviews from happy clients.
Assuming that your currency broker in Mallorca meets all of the above what would be the top ways for you to make the most of their service?
1. Be aware of exchange rate volatility and what it means for you – and your money
As an Expat you will already be well aware that exchange rates move constantly. The first step in a successful currency strategy is to understand how this can affect your returns from currency exchanges, particularly when it comes to transferring larger amounts for property and international investments, such as yachts and cars.
The canny international investor does not simply buy their international currency based on the rate of that day – unless they have to. Rates fluctuate by the minute so, by the time you complete your purchase and need to make the currency trade, the rate could have dropped dramatically.
For example, when the GBPEUR rate hit over 1.43 in the summer of 2015, €250,000 would have cost £174,825. Only one month later, when the rate slumped to 1.35, the cost of the same transaction in Pounds Sterling increased by over £10,000 to £185,185.
With the above in mind, maybe it’s a good idea to speak to a recommended currency broker in Mallorca as soon as you know you have to make international payments to or from Spain. You can stay on top of the exchange rates and take steps to avoid the risk of currency fluctuations. Please refer to our Partners page for details of our trusted foreign exchange brokers Halo Financial.
2.Know the difference between a good currency broker in Mallorca and your bank
It’s also worth understanding the difference between a currency broker and a bank. A currency specialist keeps an eye on the markets for you, offers specialist currency products and services to help protect you against currency risk, and will usually be able to offer you a better rate than a high street bank. Recent examples have been as much as 4% improvement on every transfer.
As an example we have a great many Yacht Crew clients who use their bank accounts for foreign currency transactions, and whilst the phrase “non-sterling transaction” with £5.50 next to it may not seem much, multiply by 50 times in a couple of months and add the poor exchange rate into the mix and you have £300-400 per month wasted.
3.Create a currency strategy to protect your international payments
You might not realise that there are steps you can take to avoid the risk of currency fluctuations. There are a number of specialist currency tools you can use making use of a specialist currency product called a forward contract. This enables you to lock in an exchange rate at the time you commit to purchasing the property. This means that you will not lose any money if the currency markets move dramatically while the sale is in progress. When the time comes to transfer the final balance for a property, you can be safe in the knowledge that the rate (and therefore the price of the property in sterling) will remain the same – no matter what the market is doing.
You can use a combination of currency tools or individual services available from your currency broker in Mallorca to protect your international payments from exchange rate fluctuations. You can even set exchange rates in advance for planned future payments.
Forward trades (Forward contracts) allow you to set an exchange rate when it is favourable, but actually make the trade at a later date at a time that suits your needs – this can be up to a year in advance, as long as you have proof of the nature of the payment you want to make. It can help you plan and offers cost certainty for international payments, whatever the reason for your exchange.
Automated orders automatically complete a currency trade when the markets reach your desired exchange rate, after choosing a rate with your currency specialist. This type of currency tool lets you make the most of currency volatility in times of uncertainty and protect against losses, without having to monitor the exchange rates yourself.
4.Organise a plan to automate regular international payments
You can also set up regular currency trades with your specialist currency broker in Mallorca. Any regular currency trades required at selected intervals, such as a salary, mortgage, pension, or bill payment, would automatically take place at a time that you have set, so you won’t need to worry about watching the exchange rates or remembering to make your next payment to or from Spain.
You can protect the rate of your regular currency payments by setting the foreign currency amount in advance, fixing your home currency amount, or by setting both currency amounts in advance to ensure you are not affected by any exchange rate volatility. Much like a standard Forward currency trade, the exchange rate can be set up to 12 months in advance.
5.Understand the tax and legislative differences between Spain and the UK
Both inheritance laws and taxation differ in Spain compared to the UK, so it’s a good idea to seek professional independent financial advice about how your worldwide estate could be affected by investments in Spain, whether they are property investments or Investment Funds. This is likely to become more complicated when the UK leaves the EU
6.Seek professional independent financial advice
Bearing in mind all of the above it makes sense to seek guidance from one of the team at Haven Financial Advisers.
