The Financial Services Sector

Question 1

• What are the 3 roles of the financial services sector

Answer 1

Investment Chain

Managing Risk

Payment Systems

Question 2

• what is the investment chain

Answer 2

Provides the link between organisations needing
capital and those with capital available for investment

Question 3

• What 2 ways is risk managed

Answer 3

• use of insurance
• sophisticated derivatives

Question 4

• What 4 types of organizations do Wholesale financial market cater to

Answer 4

Government
Companies,
Public sector organisations,
Financial institutions

Question 5

Which 2 types of customers does the retail financial cater to?

Answer 5

individuals
small businesses

Question 6

• What are the 3 activity’s of wholesale financial market

Answer 6

• Raise finance
• Mange risk (derivatives, insurance)
• Invest

Question 7

• what are the 4 activity’s of retail financial market

Answer 7

• Banking
• Lending
• Insurance
• Wealth management

Question 8

what are the types of Types of Bank and Savings Institutions, What they do?

Answer 8

• Retail and Commercial Banks = provide Financial services + Owned by Shareholders (In person & online, all services associated retail sector)
• Savings Institutions = provide Financial services + Owned by Depositors & borrowers (In person & online, all services associated retail sector)
• Finance Companies = provide financing to Retail & Wholesale sectors, get there funding from capital market

Question 9

What is the difference between retail & commercial banks and Savings institutions?

Answer 9

retail and commercial bank is owned by the shareholders

Savings institutions are owned by the Depositors & borrowers

Question 10

How do Finance company differ from Banks & Savings institutions

Answer 10

Finance company get’s it’s capital directly capital markets and not from depositors

Question 11

• What do investment banks do

Answer 11

Provide services to the Wholesale sector?

Question 12

• What 3 services do Investment banks provide

Answer 12

1) Raise Finance
2) Aid risk management
3) Investment management

All the key wholesale financial services

Question 13

• What do pensions funds do

Answer 13

Pension funds
- receive contributions from, or on behalf of, employees
- provide an income on to employees retirement.

Question 14

• What do Fund managers do

Answer 14

Fund managers manage portfolios for different types of client

Question 15

What are the 3 types of investment managers & who do they cater to

Answer 15

1) Institutional Fund Managers
- Institutions
- I.E- Company’s corporate pension fund, insurance company’s fund.

2) Mutual Fund Managers
* General Public

3) Discretionary Investment Managers
* Individual Private Clients.

Question 16

• What do Custodians do

Answer 16

Custodians are banks that specialism in
- safe custody
- asset services

Question 17

• What activity does a custodian undertake

Answer 17

• Arranging settlement
• reporting
• reconciliations

Question 18

• What is wealth management

Answer 18

• Wealth management refers to the provision of financial services
• that have the goal of preserving and enhancing clients’ wealth

Question 19

• What are the 2 services that comprise wealth management

Answer 19

• Financial advice
• investment management

Question 20

• What 3 services do Financial planners provide

Answer 20

• Investment planning/ advice
• tax planning
• asset protection and estate
  planning

Question 21

• What is the FPSB

Answer 21

it is the certified educator body for Financial planning

Question 22

• What is a CFP

Answer 22

professional qualification relating Financial Planning

Question 23

• What are the 2 types of portfolio management

Answer 23

• Discretionary basis
• Non-discretionary

Question 24

Explain the Discretionary basis of Portfolio management

Answer 24

portfolio manager makes investment decisions

Question 25

Explain the non Discretionary basis of Portfolio management

Answer 25

Portfolios manager recommends though does not make decisions

Question 26

What are Platforms, what do they often additionally provide?

Answer 26

Platforms are online services used by intermediaries, such as independent financial advisers,
to view and administer their clients’ investment portfolios.

Question 27

What do Platforms additionally provide?

Answer 27

analyse a client’s overall portfolio

arrange custody for clients’ assets.

Question 28

What is Robo- Advice, What does it use

Answer 28

• Robo-advice is the application of technology to the process of providing financial advice,
• Robo-advisers are able to provide wealth management advice
  with the use of algorithms

Question 29

What role does the investment chain perform?

Answer 29

Section 1.1

Question 30

How does a traditional bank differ from a mutually-owned savings institution? Answer reference:

Answer 30

Section 1.2.1

Question 31

If an investment bank is trading in bonds, is it likely to operate in the wholesale or retail
market? Answer reference:

Answer 31

Section 1.2

Question 32

Who are the typical customers of an investment bank? Answer reference:

Answer 32

Section 1.2.2

Question 33

Which market participant is responsible for the safekeeping of assets?

Answer 33

Section 1.2.5

Question 34

How does discretionary investment management differ from advisory investment
management?

Answer 34

Section 1.3.3