Easiest way to diversify savings

Question

Finance has always been a bit of a black art beyond current and savings accounts, so I'm hoping this makes sense.

In light of the possibility of Britain leaving the EU (that isn't the actual reason, more of a reminder for me) I'm interested in ways of spreading my savings around a bit, mainly keeping a portion of them outside the UK / invested in a different currency.

What is the easiest way to do this?

Are there banks where you can open a bank account without being a citizen of that country without having to visit the bank in person? Are there UK banks that allow you to hold savings in a different currency? Are there any online services for investing money that aren't tied to any particular country?

(Note: I don't object to visiting a foreign country to open a bank account, I quite enjoy travelling, but ease of access is important)

Answer 1

Having savings only in your home currency is relatively 'low risk' compared with other types of 'low diversification'. This is because, in a simple case, your future cash outflows will be in your home currency, so if the GBP fluctuates in value, it will (theoretically) still buy you the same goods at home. In this way, keeping your savings in the same currency as your future expenditures creates a natural hedge against currency fluctuation.

This gets complicated for goods imported from other countries, where base price fluctuates based on a foreign currency, or for situations where you expect to incur significant foreign currency expenditures (retirement elsewhere, etc.). In such cases, you no longer have certainty that your future expenditures will be based on the GBP, and saving money in other currencies may make more sense.

In many circumstances, 'diversification' of the currency of your savings may actually increase your risk, not decrease it. Be sure you are doing this for a specific reason, with a specific strategy, and not just to generally 'spread your money around'. Even in case of a Brexit, consider: what would you do with a bank account full of USD? If the answer is "Convert it back to GBP when needed (in 6 months, 5 years, 30, etc.), to buy British goods", then I wouldn't call this a way to reduce your risk. Instead, I would call it a type of investment, with its own set of risks associated.

Answer 2

You can apply for Foreign currency accounts. But they aren't saving accounts by any means, but more like current accounts. Taking money out will involve charges. You have to visit the bank website to figure out what all operations can be performed on your account. Barclays and HSBC allow accounts in foreign currency. Other banks also will be providing the same services.

Are there banks where you can open a bank account without being a citizen of that country without having to visit the bank in person

Depends on country by country.

Are there any online services for investing money that aren't tied to any particular country?

Get yourself a trading account and invest in foreign markets i.e. equities, bonds etc.

But all in all be ready for the foreign exchange risks involved in denominating assets in multiple currencies.

Answer 3

Are there banks where you can open a bank account without being a citizen of that country without having to visit the bank in person?

I've done it the other way around, opened a bank account in the UK so I have a way to store GBP. Given that Britain is still in the EU you can basically open an account anywhere. German online banks for instance allow you to administrate anything online, should there be cards issued you would need an address in the country. And for opening an account a passport is sufficient, you can identify yourself in a video chat. Now what's the downside? French banks' online services are in French, German banks' services are in German. If that doesn't put you off, I would name such banks in the comments if asked.

Are there any online services for investing money that aren't tied to any particular country?

Can you clarify that? You should at least be able to buy into any European or American stock through your broker. That should give you an ease of mind being FCA-regulated. However, those are usually GDRs (global depository receipts) and denominated in GBp (pence) so you'd be visually exposed to currency rates, by which I mean that if the stock goes up 1% but the GBP goes up 1% in the same period then your GDR would show a 0% profit on that day; also, and more annoyingly, dividends are distributed in the foreign currency, then exchanged by the issuer of the GDR on that day and booked into your account, so if you want to be in full control of the cashflows you should get a trading account denominated in the currency (and maybe situated in the country) you're planning to invest in.

If you're really serious about it, some brokers/banks offer multi-currency trading accounts (again I will name them if asked) where you can trade a wide range of instruments natively (i.e. on the primary exchanges) and you get to manage everything in one interface. Those accounts typically include access to the foreign exchange markets so you can move cash between your accounts freely (well for a surcharge). Also, typically each subaccount is issued its own IBAN.