The obvious route would be to call your bank and ask them to send the money. That would certainly result in a transfer of funds but the loss you would suffer through the exchange rate is an unnecessary waste and there are more efficient and less expensive options open to you which are better suited to the needs of a migrant.
Get the right exchange rate
Getting the right exchange rate is all about timing. The Sterling – Canadian Dollar exchange rate, for example, has travelled between C$ 1.4850 and C$ 1.64 in the last 5 months so choose a broker who will keep you up to date with relevant market information and will proactively prompt you when something happens which will affect your funds.
If you can, it is worth speaking with a broker who can offer automated market orders. As the currency market operates on a 24 hour a day, 6 days a week basis and Canada trades outside of UK trading hours, it is essential that the orders you place are monitored around the clock. If you have that facility, then you can place an order to target an exchange rate above the current market level on what is called a ‘Take profit’ or ‘Limit’ order. Once placed, if your targeted exchange rate is available anywhere in the world day or night, the order will be triggered.
You can also place an order below the current rate as a safety net to ensure you don’t get anything worse than a pre-determined exchange rate. This is particularly useful if the exchange rate is moving in your favour and/or if you cannot afford to make the move to Canada unless you can achieve a particular exchange rate.
Alternatively, you can obviously just watch the market and hope to catch the exchange rate at a level to suit you but the chances of being in front of your PC at exactly the right moment are pretty slim so you are generally better off using the market tools to do the donkey work for you.
The right settlement date
And once you have achieved your ideal exchange rate, there is a decision to make as to when you want to actually pay for your currency. The options are to agree an immediate swap of funds or set up an agreement to exchange funds at a date in the future.
An immediate transfer is generally known as a spot contract. This used to only refer to agreements which were settled on the 2nd business day from the contract being struck but the more flexible dealers will tend to allow up to 5 working days to arrange this, generally making allowances for internet banking payment times which take up to 4 working days.
However, it is kind of inevitable that the exchange rate will be at terrific levels just at a time when you are not ready to transfer funds. In this instance, or if your funds are largely tied up in a property or investments, it is possible to agree the exchange rate straight away but delay the actual transfer of funds until a date up to 24 months in the future. This is known as a Forward Contract and as I am sure you can imagine, this is very popular with migrants who may not quite be ready to get on a flight yet but who simply do not want to miss the right exchange rate opportunity. The broker will want some form of security deposit before they will hold this contract open for a lengthy period; normally 10% of the contract amount. The beauty of this is that, even if your funds are liquid, you can keep 90% of the contract amount in some form of investment so at least the bulk of your funds can still be working for you even after you have set your currency exchange in motion.
That same principle of agreeing an exchange rate now but setting a later delivery date applies to smaller regular monthly transfers. It is often the case that migrants will salt away small sums in a Canadian account prior to departure or have to move regular amounts for rental payments, mortgages, pension transfers and all manner of other reasons. Being able to set an exchange rate for up to 24 monthly payments in advance does allow them to budget and adds a degree of certainty that is missing if you have to book each transfer individually.
Choose a route to suit
Any or all of these techniques can be used in the course of one family’s migration to Canada. It may be that a short-term spot transfer is necessary to get living expenses across to Canada, a forward contract is appropriate for the bulk of equity from a house or investments lump sum and then smaller ad hoc payments are required to manage the balance of funds alongside a group of regular transfers for ongoing mortgage payments necessary until the UK house is sold.
Whatever the need, there is a contract to suit; the key is to make sure you discuss your requirements with a currency expert to ensure you are aware of all your options before you choose the path that best suits you.
