Financial advisers can save clients thousands of dollars in fees in the current low-return environment by using new technology to process foreign exchange transactions.
While many advisers still think of foreign exchange (FX) conversion as a simple transaction to outsource, we regularly see the difference white labelling a high-level FX service has on their clients.
It saves fees, but it also acts as a lever to build a stronger relationship just as clients are grappling with rising living costs in the wake of multiple interest rate rises.
Rising rates have added several hundred dollars a month to a typical mortgage and are expected to force consumers to ultimately cut back on expenditure.
Meanwhile, investment returns are under pressure. According to Lonsec data, the median balanced super fund lost 3.1 per cent in 2021/22 – the first negative returns since the global financial crisis – amid growing inflation concerns.
This combination of rising living costs and lower returns puts pressure on investors from both directions.
Advice fees come into sharper focus in this environment because they take up an even greater proportion of returns. Advisers need to do more than deliver great advice; they need to demonstrate its value.
Australian Competition and Consumer Commission (ACCC) figures show individuals sending money transfers through the big four banks in US dollars and British pounds during 2017/18 spent an estimated A$150 million more than they had to – it’s an easy win.
Bank FX transaction costs remain high, lack transparency
FX transfers are big business. Australian consumers purchase the equivalent of more than A$40 billion in foreign currency each year, according to a 2019 ACCC report.
FlashFX’s adviser-focused service, Flash Manage, helps a wide range of adviser clients. Many are high net worth investors who regularly need to shift money, but we also serve plenty of individuals who make one-off transactions. An expat may live overseas and need to send money back to Australia or parents may want to help their child overseas buy a house. Some clients have businesses that trade internationally.
Yet banks regularly still charge more than 5 per cent to process FX transactions compared to FlashFX, which can charge fees as low as 0.5 per cent.
Even a small currency conversion of US$50,000 can cost an extra $2000 to transfer when using a bank’s services.
Headline fees charged by fund managers and platforms have slowly come down over the years, but other fees, such as those related to FX, have avoided the same type of scrutiny.
It is an easy way for advisers to save clients money and show the value of advice, particularly given regulatory reforms have placed significant focus on fees and investment returns are under pressure.
This perception of value comes from thinking beyond traditional investment products to help clients achieve their goals.
Expand the scope of advice: your brand, our infrastructure
Flash Connect is FlashFX’s application programming interface or API solution for advice businesses and financial services enterprises. It allows advisers to white label an FX conversion service that saves clients fees while also delivering a high-touch service.
It strengthens the relationship in several ways. The adviser can make transfers on behalf of their clients or clients can be given access to the portal where they can set up their own transfers. Advisers are always notified of transfers and progress via email.
The client sees the adviser’s brand and understands the clear link between a better service delivered with lower fees.
While the history of the big four banks comes with high levels of security and trust, they are governed by the same regulations as FlashFX.
We obtained an Australian financial services licence in 2016, which allows us to hold accounts for companies, while our integration with Blockchain and Ripple gives us additional layers of security.
Nicolas Steiger is chief operating officer at FlashFX.