Smart Currency Exchange is celebrating 20 years in business.
A lot has changed since 2004. A French property you would pay €250,000 in 2024 would have cost you €160,000 in 2004. Even better, you would have got nearly €1.50 per £1 and €1.23 per $1!
Well, we can’t turn the clock back, but we can make sure that your property budget in France is protected from now on. We spoke to Senior Account Manager Jack Wiggs, who explains why the euro has strengthened over the past 20 years and also offers five vital things to understand about foreign exchange transactions.
Q: In the past 20 years, currencies have been through several of what we might call ‘black swan events’. Events that seem to come out of the blue and cause a huge shock.
JW: That’s correct. I haven’t been here all the past 20 years, but even in my time we have got through the Covid epidemic and the chaos surrounding the mini-Budget, both of which saw sterling weaken by as much as 10%.
But Smart was also around to help clients deal with the financial crisis of 2008 and the Brexit vote.
Q: As a specialist in large transactions, such as for property, these must have been difficult for your clients?
JW: Of course. If a client had committed to, say, buying a €300,000 property in France in early 2020, they might have been expecting to need to find £250,000. Instead, a month later they would need to find an extra £35,000. Not everyone can do that!
Q: Is that why you focus so much on ‘risk management’?
JW: Exactly. We’re not dealing with holiday cash, but in clients’ long-held dreams, their life savings, their home. Smart Currency’s success over the past 20 years, seeing us winning awards year after year, is in protecting client’s assets and dreams.
That brings us on to your 5 vital things to understand about foreign exchange transactions. What’s your first?
One. You cannot predict exchange rates.
It’s the first question everyone asks. Where is the pound going, is it worth waiting…? I have to say, no-one knows. For example, between December 2019 and April 2020, the pound did very little when Boris Johnson won the election but then it gained enormously when he announced a new chancellor that no-one had heard of, then it dropped 15% when Covid hit. None of that was predicted.
But hey, most of will listen to a horoscope even if we don’t believe it, and that’s why we produce our Quarterly Forecast where you can read what large financial institutions are predicting. Just don’t bet your house on their fortune telling. You can read the latest Quarterly Forecast here.
Two. You will hate it if you lose money
Don’t just take my word for this, take the word of Nobel prize-winning behavioural scientist Daniel Kahneman and others, who found that the pain of losing is three times worse than the pleasure of winning. So, by all means hold out for that better rate, but you’ll probably enjoy it less than you think, and if your exchange rate weakens before you complete, it’s not just the loss of money, it’s the risk to your long-held dreams if you cannot complete.
Three. The pound tends to rise slowly and fall fast.
If you look at a long-term currency graph, the pound tends to rise gradually but fall dramatically. There are technical reasons for that. Sterling used to be a reserve currency which people bought in times of trouble, but now they buy US dollars, yen or euros or instead. So if there is a crisis, such as a pandemic, or war in Ukraine, what the markets call a ‘risk off’ sentiment means that sterling gets sold very quickly and your rate can fall off a cliff.
Four. There is real value in traditional ways of doing business.
By that I mean, having a person at the end of the phone, not a call centre. Working with a business that’s still owner-managed, not being owned by a hedge fund. All the protections are still there – the FCA regulation, the high capitalisation, but you still get that personal service. At Smart Currency, the founder and CEO, Charles, is in the office every day.
Five. The world moves faster these days, that includes exchange rates.
There can be national economic figures released at 7am and by 8.30am your currency is worth a couple of percent less. These movements are entirely unpredictable and by the time you’ve noticed your currency losing it can be too late – your buying budget for France has dropped by maybe €10,000. The good news is that we can keep an eye on the rate for you and buy it at pre-arranged rates.
Thank you to Jack Wiggs, Senior Account Manager at Smart Currency Exchange.
To open your free currency account with Smart Currency, call 0808 163 0102 or follow this link.
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