Chapter 1: Introduction to The Financial Services Sector Flashcards
What does the financial services sector do?
Connects those needing capital with those with capital for investment.
What are the two distinct areas on the financial services sector?
Wholesale (institutional) and Retail sectors
Name the 5 markets that make up the financial services sector
Equity Markets
Bond Markets
Foreign Exchange Markets
Derivatives Market
Insurance Market
What 4 things are traded on the derivatives market?
Options, swaps, futures and forwards
What 3 activities take place in the Wholesale Sector?
Fund Management
Investment Banking
Custodian Banking
What 5 activities take place in the Retail Sector?
Retail Banking
Insurance
Pensions
Investment Services
Financial Planning and Advice
What is the global market capitalisation?
US$ 109 Trillion
What is a multilateral trading facility?
Systems that bring together multiple parties to trade shares, bonds and derivatives.
Which is the largest financial market?
Forex
What do derivatives market trade?
Complex products based on underlying instruments.
What is an underwriting syndicate?
Group of people join to underwrite insurance to spread out risk.
What is the reinsurance industry?
Insurance for insurance companies. Can lay off some risk with a reinsurer.
What is a savings institution?
Commonly known as a building society in the UK. Jointly owned by individuals who have deposited money or borrowed money “the members”.
What do savings institutions specialise in?
Services for retail customers, deposit accounts and mortgages.
What is an example of a savings institution?
National Savings & Investments. Owned by the Government, offer premium bonds and national savings certificates.
How does P2P lending differ to traditional banking model?
In banking deposits are taken by the bank and lent to others. In P2P lending this is done directly.
What are the 3 types of crowdfunding?
- Donation
- Debt crowdfunding - capital returned with interest.
- Equity crowdfunding - receive equity in venture .
What five areas do Investment Banks operate in?
- Corporate Finance
- Banking for government and institutions
- Treasury dealing
- Investment Management for sizable clients
- Securities trading
What is treasury dealing?
Managing the holdings of a company, to provide liquidity and protect against risks.
What is a Third-Party Administrator?
They undertake investment administration on behalf of other firms.
What is Financial Planning?
Planning how to meet a clients financial and lifestyle objectives.
What is the difference between an independent and restricted financial advisor?
Restricted only offers products available from their own firm, whereas independent gives unbiased advice on all financial products.
What does Execution-Only mean in Investment Distribution?
This is a firm that will only do what the customer tells it to. They offer no advice.
What do Execution-Only firms have to ensure that they do?
Retain evidence that they
- Gave no advice
- They’re not responsible for assessing product suitability
What is a Platform?
Online services used by intermediaries, such as financial advisors, to view and administer client portfolios. E.g. Hargreaves Lansdown
