How Absa’s foreign exchange solutions cater to Wealth clients’ specific needs
Author: Janeal Haskins, Head: Forex Sales & International Banking (Relationship Banking)
Absa’s Wealth Banking clients demand personalised solutions that consider their particular and sometimes peculiar needs. For example, by law South Africans are allowed to transfer up to R1 million offshore per calendar year without having to obtain tax clearance. “That’s about $55 000, and a Wealth client will surpass that limit quickly just on travel, never mind on investing or paying for overseas schooling,” says Janeal Haskins, Head of Forex Sales & International Banking (Relationship Banking) at Absa Group. “They really are global citizens.”
Foreign exchange (forex, or FX) is central to that, which is why the Wealth Banking team offers what Haskins describes as “a holistic value proposition centred on an advice-led model”.
“Every execution or transaction will come off the back of a conversation, where we seek to understand the client’s goal or ambition,” she explains. “What do they want to achieve? Where’s the money going? If, for example, they are moving R500 million into a foreign currency, what do they need to consider? We will discuss their options around currency hedging and risk mitigation so that the client can make an informed decision.”
Foreign currency saved locally
The Currency Investment Account (CIA) is one of the services that the Wealth Division offers to its high-net-worth and family office clients.
“These are currency-denominated accounts that are held locally by Absa, but are reported as cross-border transactions,” Haskins says. “We offer more than 18 currencies, with the US dollar being the most lucrative. While the global interest rate hike cycle can be quite punitive on the domestic side, it’s proving to be quite lucrative for clients who have significant offshore currency holdings. We’re able to offer very attractive interest rates on the dollar. Even on the euro – which was accruing negative credit interest rates prior to Covid, all of these depending on the client’s holding. We are also able to term deposits, if the client doesn’t need liquidity or access to those funds and, as with any deposit, the longer the tenor the higher the yield will be for the client, minimum thresholds apply. This enables the client to hedge their exchange rate risk, whilst saving simultaneously”.
Because the Currency Investment Account CIA is not a banking transactional account, it has no associated monthly charges. “The funds are freely available,” says Haskins. “And if the client wants to make a transfer to an offshore account, it’s a straight currency-to-currency transfer with no further exchange rate implications.”
Global solutions for jet-setters.
The Currency Investment Account CIA is interoperable with Absa’s Multi-Currency Cash Passport (MCCP), which can have up to seven currencies loaded. “Our Wealth clients travel extensively, and when they do we advise them to transfer funds from their Currency Investment Account CIA into their MCCP,” says Haskins. “In doing so, they don’t take on any exchange rate risk – and as an Absa Private and Wealth client they also get very competitive rates. The MCCP card can then be used as a normal debit card, which also eliminates the nasty surprises that come with the high currency conversion fee charges when you use a credit card.”
This also eliminates the expense involved in converting foreign currency back into rands within 30 days of returning home, as is a regulatory requirement. “Although it’s a mandatory requirement, many people don’t do it because it’s expensive and inconvenient,” Haskins says. “Typically, when a bank sells you currency you’ll buy high, but when you sell that currency it will buy back low. A good solution to that is to simply transfer the money back into your currency account, where it can continue to earn interest” this does not include currency notes purchased.
She emphasises that “Everything we do for our Wealth clients is over and above our advice-led service, and we ensure we have differentiation in our pricing, product and service offering”. We ensure we have the right solutions, enhanced to be attractive to our Wealth clients. And we don’t just push products. We engage to understand what the most appropriate solution and advice would be for the individual.”
After all, Haskins concludes, “These are sophisticated, well-established individuals who require end-to-end solutions from their bank.”