financial intermediaries and its types

financial intermediaries by ranjitha

1. FINANCIAL INTERMEDIARIES

2. AGENDA DEFINITION TYPES ADVANTAGES SUMMARY AND CONCLUSION

3. DEFINITION Financial intermediaries hold a very important role in the flow of money in the financial world. The assistance of a financial intermediary is needed by companies who want somebody to act as a middle man in raising money from the investors. Meeting up between these two parties are often very difficult without the help of financial intermediaries.

4. EXAMPLE OF UNICON

5. TYPES OF FINANCIAL INTERMEDIARIES INSURANCE COMPANY MUTUAL FUNDS COMPANIES NON BANKING FINANCE COMPANIES INVESTMENT BROKERS INVESTMENT BANKERS ESCROW COMPANIES PENSION FUNDS COLLECTIVE INVESTMENT SCHEME

6. INSURANCE COMPANIES Insurance companies concentrate on fulfilling the insurance needs of the community , both for life and non life insurance. These companies offer products that allow investors to select the kind of policies to suit their financial planning needs.. These companies also offer policies for funding a child’s education and marriage, and providing a steady income for the aged through annuities and pensions

7. MUTUAL FUNDS Mutual funds (MFs) organisations satisfy the needs of individuals investors through pooling resources from a large number with similar investments goals and risks appetite. The resource collected are invested in the capital and money market securities. The returns are distributed to investors optimising the return for the investors.

8. HOW MUTUAL FUNDS WORK

9. NON BANKING FINANCE COMPANIES NBFCs are commonly knows as finance companies and are corporate bodies, which concentrate mainly on lending activities in a well defined area.

10. INVESTMENT BROKERS  The main duty of investment brokers is to transact the security sales. There are discount brokers and full-service brokers. They provide an opportunity online for some individuals to promote their trades. Aside from that they can also solicit valuable investment advice to some clients who may need it that time.

11. INVESTMENT BANKERS  The main duty of this financial intermediary is to increase monetary amounts of companies through stocks and bonds. Since conducting stock offerings and issuing bonds is so expensive, investment bankers focuses on how they can help the firm to earn more capital

12. ESCROW COMPANIES  This is the type of financial intermediary that is built for the very purpose. These companies acts like an unconcerned party that will hold instructions for execution as well as the grounds agreed for it.

13. PENSION FUND A  pension fund  is any plan, fund, or scheme which provides retirement income. Pension funds are important to shareholders of listed and private companies. They are especially important to the stock market where large institutional investors dominate.

14. CLASSIFICATION OF PENSION FUND THERE ARE TWO TYPES OF PENSION FUND OPEN VS. CLOSED PENSION FUNDS PUBLIC VS. PRIVATE PENSION FUND

15. Open vs. closed pension funds Open pension funds support at least one pension plan with no restriction on membership while closed pension funds support only pension plans that are limited to certain employees

16. CLOSE PENSION FUNDS Closed pension funds are further subclassified into: Single employer pension funds Multi-employer pension funds Related member pension funds Individual pension funds

17. Public vs. private pension funds A public pension fund is one that is regulated under public sector law while a private pension fund is regulated under private sector law. In certain countries the distinction between public or government pension funds and private pension funds may be difficult to assess. In others, the distinction is made sharply in law, with very specific requirements for administration and investment. For example, local governmental bodies in the United States are subject to laws passed by the states in which those localities exist, and these laws include provisions such as defining classes of permitted investments and a minimum municipal obligation.

18. COLLECTIVE INVESTMENT SCHEME A  collective investment scheme  is a way of investing money alongside other investors in order to benefit from the inherent advantages of working as part of a group. These advantages include an ability to hire a professional investment manager, which theoretically offers the prospects of better returns and/or risk management benefit from economies of scale - cost sharing among others diversify more than would be feasible for most individual investors which, theoretically, reduces risk

19. ADVANTAGES OF FINANCIAL INTERMEDIARIES There are 2 essential advantages from using financial intermediaries: Cost advantage over direct lending/borrowing Market failure protection the conflicting needs of lenders and borrowers are reconciled, preventing  market failure

20. SUMMARY AND CONCLUSION Financial institutions (intermediaries) perform the vital role of bringing together those economic agents with surplus funds who want to lend, with those with a shortage of funds who want to borrow. In doing this they offer the major benefits of maturity and risk transformation. It is possible for this to be done by direct contact between the ultimate borrowers, but there are major cost disadvantages of direct finance. Indeed, one explanation of the existence of specialist financial intermediaries is that they have a related (cost) advantage in offering financial services, which not only enables them to make profit, but also raises the overall efficiency of the economy. The other main explanation draws on the analysis of informat finance

21. THANK YOU RANJITHA J