2.3 Providers Of Long-Term Savings And Investment Products Flashcards
Name the financial services providers that offer long term savings and investment products
Banks
Building societies
NS&I
Post office
What are Friendly Societies?
What do they offer?
Mutual organisations that offer their members a wide range of financial products.
- short term savings accounts
- long term savings accounts
- investments
- life insurance
- pensions
- annuities
What do insurance companies provide?
A range of long term investment products that incorporate life assurance and pensions
How do pension funds work?
They accept people’s savings throughout their working lives and invest the money so that the savers will eventually have a pensions to finance their retirement.
Give the types of investment products
Those that aim to grow the money over time.
Those that provide a regular income from the money invested.
How does an investor choose an investment product?
According to whether they want growth, income or some combination of both.
-> must have a clear investment objective.
What does it mean if someone wants ‘capital growth from an investment’?
They’re trying to make the total sum grow over time
Why might someone want capital growth from an investment?
In order to fulfil a long term want or aspiration.
Eg parent wants to save for children’s education.
Where do managers of growth funds normally invest clients money?
In companies that they believe will give them above average returns.
How does someone get income from an investment?
Use a sum of money that they have already accumulated to give them an annual return, which they can regard as part of their household income.
Give an example of someone that might use an investment fund to receive an annual income
Someone who inherits / wins a large amount of money.
A chance to fulfil an aspiration eg travelling.
Rather than leave the interest earnings in the fund, they sacrifice growth in order to take the income out and spent it.
Someone who retires and wants to use their money to buy them an income in their old age.
They buy an ‘annuity’ which means they hand their lump sum over to an insurance company and , in return, they are paid an income for the rest of their lives.
Might someone want capital growth and income from an investment?
Yes
What will an investment company take into account when investing someone’s money?
Attitude to risk
The amount to be invested
The length of time for which they can invest it
Name the different types of investment provider which offer packaged products that can be tailored for the private investor
Trusts
Open-ended investment companies (OEIC)
Investment trusts
What do stockbrokers do?
Carry our deals for people who want to buy and sell shares, bonds and other instruments.
