One of our frequently contributing members posted an insightful group comment on the fees for currency exchange and options to reduce them. He was told by his bank that for a currency exchange he had to pay a commission of 1.5%, however, he got it down to 0.3% after re-negotiating the fee with his adviser. An unusually high discount, but still his experience is affirmed by other feedback we got from members.Currency exchange is expensive and provides a substantial extra earning for the bank. Especially because many clients underestimate the costs and also how often currency exchange is necessary when for instance the adviser recommends diversifying the asset allocation internationally.
To minimize the costs of currency exchanges clients should do three things: Firstly, have a clear idea of the long-term currency split they would like to have in their portfolio. A clear strategy prevents a rather unstructured changing back and forth of currencies due to changes in the asset allocation. Also it is worthwhile to check if the particular stock, fund, ETF etc. is quoted in various currencies, so that they can avoid currency exchange in their investments. Secondly and in particular when changing larger sums the investor should check possible discounts with his adviser. Thirdly, if he frequently trades assets in different currencies it can pay off to have an account with an online broker. Often they offer significantly lower fees.