With the U.S. facing a weakening dollar and a recession, many investors are interested in investing some money in foreign countries; the foreign exchange market, also known as forex or FX, is crucial in that endeavor. HiFX, Inc. is an international company that seeks to simplify the process of investing using the foreign exchange market.
“To a lot of consumers, foreign exchange markets…feel very complex. And we tend to help people get through that pretty easily,” Ward Naughton, president of HiFX, said. HiFX offers “personalized service, because it’s an important part of what you’re doing [as an investor].”
HiFX offers its clients better exchange rates than banks offer. One reason they are able to do so is that they have lower costs than banks, Naughton said. “We don’t have all the bank branches and all that infrastructure. We do everything through centralized locations and call centers, so our cost basis is less to begin with.”
“We do $40 billion in FX a year…we get very, very competitive rates from our suppliers,” he said. “We’re almost like a Fortune 500 company working on behalf of our clients….It’s almost like a Costco model. We get wholesale rates and we give [clients] better than straight retail rates that they would otherwise get on their own.”
HiFX offers investors assistance with everything from emigration to importation. They have a variety of ways in which they can help investors purchase property overseas, including money transfers and mortgages. They offer mortgages for several European countries, Dubai and South Africa.
“If you’re buying property overseas, or you’re making an investment overseas, and you need to move currency amounts—generally in excess of $5,000—overseas, we’re the type of firm [that] can help you do that, and in a very cost-effective way,” Naughton said. “If you’re buying, say, property in Europe, what do you do? You try to go into a bank branch and you would never be able to do that very effectively. It would be very cumbersome.”
HiFX can help both investors with defined timeframes for investment and those without. “If you’re making an investment overseas and you know you’re going to close in, say, 30 or 60 days on a piece of real estate…we can say, ‘Based on what’s going on in the market right now, where…the dollar is very weak…our expectation is that the U.S. currency could move anywhere between 2 and 4 percent against different currencies,” Naughton said. “And so you can actually have an intelligent decision made on foreign exchange tied to that investment decision.”
Alternatively, Naughton said, “If you say, ‘Hey, look, in six months, I’m going to need this currency, but I don’t want to lock it in today…we’ll be watching that….We’ll give you insight and input and then you can decide, ‘Okay, I want to enter into execution of this contract.'”
In addition to offering its clients better exchange rates than banks offer, HiFX offers its clients the ability to lock in a particular exchange rate for up to two years. “We allow the client or investor to lock in what we call a forward rate. And that forward rate says you can lock in a rate for up to two years, based on whatever your needs are,” Naughton said.
This forward rate could be beneficial for investors who are wary of the shifting and fluid global market and remove some of the risk that would otherwise deter some investors. “Let’s say you’re going to have a series of payments you’re going to make over a two-year period, and you say ‘I want to know what my exchange rate is. I don’t want to be subject to market volatility,'” Naughton said. “We get a rate that will essentially be the rate that you can get over…whatever timeframe, up to two years.”
“It removes the uncertainty in the marketplace…it’s like an insurance policy,” Naughton said. “There’s a small spread built into that rate…it’s basically an insurance premium, if you will, that’s built into that [forward] rate.”
The price of the small spread may be well worth it to investors who wish to not be subject to market volatility. “The Canadian dollar fluctuated 14 percent between October and November,” Naughton said. “If you had had to send dollars to Canada during that period, you would have taken a significant hit as an investor. It would probably have destroyed your returns. We could have done a forward rate agreement that would have protected you against that.”
The price of that protection, however, also means that investors who use the forward rate option do not benefit from market changes that would be in their favor because they are already locked in at a certain rate. “If rates move the other way, you don’t get the benefit,” Naughton said.
The process for investors who are interested in using HiFX’s services is fairly straightforward. “They open up an application, they tell us what currency they’re interested in [and] what timeframe, they tell us whether they want to do it spot—which means today—or whether they want to do it at a future date, and we basically enter that into our system and we watch that position,” Naughton said. “We send the money right away to where you want us to designate it, so we don’t sit on your money. All we are is basically a facilitator,” Naughton said.
HiFX, Inc., which last year helped 30,000 people buy and sell foreign currency, according to their website, was founded in 1998. HiFX, Inc. is seeking licensure as a money transmitter in California. Investors in California who are interested in using HiFX’s services can contact HiFX’s affiliate, HiFX Plc.