Tantalising allure of “experts” for your currency needs

Would you trust a stranger with your finance decisions? Many businesses trust someone who barely knows their business because of their perceived “expertise" in currency markets. Hounded by daily calls from FX specialists (brokers), they give in to the idea of trusting their promise of better prices and service. 

 

Some are lucky and find what they need. Many are frustrated and eventually feel tricked into wrong decisions by inexperienced FX brokers promising them a “crystal ball” ("you need Euros, Euro is going higher, so buy it now!”).

 

This is not to say there are no great FX specialists outside banks. There are many! But they come at a premium, and most likely, they get to work with bigger businesses. And most small businesses will usually get less experienced ones. Or, in rare cases - less than honest ones, using the opaque world of foreign exchange to their own advantage. But even this is not the biggest problem.

 

Are there good reasons to trust currency brokers? Plenty - if all you need is currency payments. However, most businesses need more than that when it comes to managing their international finances. Very few businesses have in-house expertise and tools to manage the risks of their international trade.  And FX brokers know that. They promise their clients "risk management solutions” and “high-impact" advise. They can "walk the walk" too - they can explain what an FX forward is and how it helps to protect from currency swings. But does this mean they know how to manage the currency risks of YOUR business?

 

Advising what’s right for your business requires proper skill and time to understand your needs, business plans and constraints. Yet, most brokers can't afford going into details with most of their clients, especially on an ongoing basis, as they compete on price. How can they give you the right advice without really knowing your needs, then?

 

It is nice to feel informed during uncertain times we live in. Yet, in the world of exchange rates, it is a fallacy. Most people outside of financial markets don’t realise this - but it is impossible to accurately forecast where exchange rates are going to be next week, next month, or next year. Any public information that can affect prices is digested by markets instantly and incorporated into traded prices. By the time an FX broker calls a client with an update about an event that caused a market swing - it is already old news. And the next event (or its outcome) that will affect the FX rates is not known yet! So the next time you are impressed with market info from your broker - do not confuse it with “expertise”.  

 

The ability to explain what drives the market swings is helpful but does not imply expertise in risk management and, most importantly, knowing your business. Trusting someone with risk management decisions in such circumstances would be akin to trusting a diagnosis by Google search when you need an in-person exam.

 

This is why most SMEs are unconvinced that risk management is for them. 96% of the UK SME exporters don’t manage currency risks, according to the British Business Bank. This is a shame because they are often left at a competitive disadvantage and with greater risks than their larger and more stable competitors.

 

HedgeFlows offers a fresh approach to managing international finances in-house. Our team took risk management best practices used by the world’s best corporations and simplified them to make them useful for smaller businesses.  Unlike an FX broker, our system doesn’t wait for you to tell us about your financial needs to give the right advice. HedgeFlows will often alert its users when their currency needs are changing. We leverage information from your ERP and accounting systems and give you an instant view of your future currency needs and risks. Our users can easily set up their hedging policy without having to become financial wizards. Our alerts give you confidence even in the most volatile markets. You and your finance team can make timely decisions and share an up-to-date, detailed view of your finances in up to 30 currencies.

 

With HedgeFlows, any decision to buy or sell foreign currency is not driven by what everyone else is doing but by your own data and best practices that help you decide what is important for your business. 

 

Businesses deserve affordable solutions that help them safely grow and compete internationally. Without them, many make poor choices, lose money, or give up on their growth. The recent pandemic and war have resulted in economic turmoil and led to continued currency volatility. This uncertainty is here to stay. Despite this, businesses can manage their finances with ease and confidence with modern solutions like HedgeFlows.