- Young saver accounts offer young people with the chance to save with the financial provider and receive interest and a variety of different banking services
- Customers who retain large amounts of money over a small period of time with a deposit account. The customer will have a higher rate deposit account.
- Term deposit account have higher rates of interest over a certain amount of time such as a year or even six months with no access to the deposit made
Pensions and investments
Most organisations offer their employees some sort of income when they retired, which is called an pension.
The pension is money from employees and employers and the individuals money invested on their behalf and being saved until they retires o that money can be paid as a w age at the end of the week or month in instalments so the individual has enough money to survive. This was going all well until the expected death rate has increased, therefore this has affected retired people because the money saved up will not pay for all of their retirement so retirement dates have to be extended and the individual has to live on a smaller pension. The pension may be managed by a financial service provider. Employees and employers can say if they want an pension. Pensions can be public, which the government sets forward and there is also an private pension, which are commonly owned by the private insurance companies and some banks.
Overdrafts
An overdraft is when the customer takes out money from the current account which is not in the account leaving the customer overdrawn. An overdraft is set up with a little charge and the overdraft is charged with interest for the period of the overdraft.
Most customers have accounts with financial providers and many tomes they have gone over the limit which the customer can use this is when the customer takes out an overdraft. It is very usual when customer go to the banks to set up an overdraft facility for the customer with a limit which is considered by the bank to be flexible form of borrowing. Overdrafts can be paid back on demand and should be only used the by the customer as a one off and not on a regular basis.
Loans and mortgages
Personal loans was introduced by banks however now are currently offered by building societies. Most customers want extra luxuries for example a holiday but just do not have the capital to pay for the holiday or may find it difficult to save the money for the extra luxury. This is basically when the customer takes the loan and pays for the holiday and pays back the loan over a period of time in instalments. Personal loans usually include the following features:
- Extra charges may be occurred for sickness or unemployment insurance
- Have a certain amount of interest which is calculated to be more than the loan
- Has to be paid in fixed instalments
- Be offered with life insurance
The loan agreements must show all the total charges being made out to the customer. Therefore this should contain the amount of loan, the total amount of money which has to be repaid, the charge for the credit and the monthly payments, and the annual percentage rate.
Business loan is essential source of business for financial service providers. Financial providers will offer a assortment of different types of loans whether the loan is a small or large amount. These loans will be offered to any organisations and there is no difference for any sized organisations. These loans can be used for anything for example to buy property. .
Most mortgages have been one of the main services offered by a building society. There is a batch of competition between the different financial provider to sell mortgages to customers. Mortgages come in long term and short term periods. The mortgage system varies for each person, the reason of this is because of the age of the property and the income which the customer will be collecting and how long it will take for the customer to pay the mortgage back.
There are different types of mortgages available, which are the following:
- Pension mortgage – this mortgage works as the basis that the pension provides tax free cash when retired. At the end of the mortgage term the loan is paid out of a tax fee lump sum of cash.
- Repayment mortgages –meaning the customer pays of all the interest and capital at the end of the term
- Individual savings account (ISA) mortgage – this mortgage works as the same as the endowment mortgage but is an individual savings account as the loan repayments. The individual may face a shortfall if the investment performs badly.
Saving facilities
Most people save capital for a number of reasons. Such as an investment for the future, for example buying a new motorbike or a car in the future or going on away on holiday. A number of financial providers offer different amounts of opportunities for the customer save up to meet their particular needs. These services depend upon:
- The age and the time of life
- Access to there funds
- The amount they wish to save
Credit facilities
When given a credit card there is always a limit which can be drawn out and spent. With a credit card goods and services can be bought and the card can be used at most retail outlets. Credit cards aren't joined with the bank accounts. The individual customer of the financial institution signs a copy of a receipt or just enters the pin which is used to access the card to make transactions but the card has to be put in the card machine before that can happen.
Every month the person will receive a statement of all the transactions made. The payments which are outstanding on will be on the statement. The card holder does not have to pay the amount but may have to pay the minimum amount. The payment can be divided up for the customer in to loads of instalments or can be paid in one large cash sum. For example they could pay monthly or weekly or pay it altogether. If the full balance is not paid the individual is charged interest on balances which have not been settled.
Insurance
Most financial providers offer their customers access to insurance facilities of different amounts. They do this through their own organisations or through other insurance companies with discounts for individuals. The customer can get covered for personal accidents, unemployment and illness. Assurances can be offered to give a fixed amount of cash. For example if a death occurs or at the end of a fixed term. Insurance covers individual needs and risks, which are the following:
- Car insurance
- House insurance
- Contents insurance
Individuals aren't the only things which need insurance. The following are a few business organisations requirements for insurance:
- Employer’s liability insurance – therefore this insures employees who have been in an accident or disease or injury caused by the workplace. This insurance does not automatically cover people and does not intend to do so.
- Public liability insurance – this insures organisations from people who claim for death, illness, loss, injury or accident. This covers the public and the employees of the organisation.
International facilities
Financial service providers offer different amount of personal and business services to meet the customers and the business needs. Customers can use cheques and cards when they are abroad as well as their credit cards. The individual can also get travellers cheques, currency for other countries and get travel insurance. Businesses services are completely different from an individual international facility. Some financial provider may have financial service providers abroad. Banks will take care of all the documentation for an exporter which the individual may need.
Factoring
Most financial service providers have a factoring service.
For example if a organisation has a problem with its cash flow or need to pay employees or company then the company will buy the book debts and may pay up to 80% of the value of the debts to be collected.
Banking facilities
The banks marketing activities and knowledge of the market are used to create specialised products for their customer’s to try and lead the market. Banking facilities also include:
- Investment management
- Different accounts and associated services
- Keeping money, deposits and valuables of individuals and businesses or safe keeping.
- Transferring money which involves cashing the cheques for their customers and transferring funds from their own customer’s accounts to other branches and banks and to other financial providers.
- The acceptance of the deposits from the customers of financial providers
- Offering savers with a rate of return
- Variety of different accounts and associated services
- Loans and other advances
- Insurance
- Dealing with shares and managing the investments.
- Financial service provider have a range of experts in wills and the administration of the estates and the death of customer of financial providers
Many services offered by financial providers have been done by the use of the Internet to help provide a form of home banking. The services listed above are offered to customers for personal and business customers. The businesses will make more us of night safe facilities rather than personal customers and factoring as well as making more use of international services.
Constraints affecting the financial services
In the environment of financial services, there is always an element of risk, with the risk higher with some businesses and products than others. There are many of different things and ways that the consumer can use in order to assess and make comparisons between different products and services, which are the following:
Risk
An individual may consider all of the risks which come with some of the products. It is easy to forget the risks involved when getting advice. When investing into securities in to stock exchange is likely to be a lot more dangerous and risky compared with investing money into a building society and getting interest benefits from the building society. The rewards of investing on to the stock exchange can be a lot higher. Customers will want a full overview of the risks which are involved when considering different services by different banks.
Convenience
Most customers will shop around for the best financial services available as some people just want services which are convenient for the customer. Quite a few customers want to be able to go to their branch of the bank rather than the convenience of using the internet to access their financial accounts. Most customers prefer internet banking. When creating a financial package things have to be kept in to consideration.
For example the customers and how they want to access their services.
Speed of service and payback
Customers want more quality customer service from their financial providers. Most financial service products the paying back period and speed is not as fast as the customers want it to be and it is slower than other products when it comes to payback.
Flexibility of the finance
Some services have different facilities and services and benefits which make them out within the diverse market for such products. The main flexible form of borrowing is when a shortfall occurs for the individual or the organisation. When the customer wants to borrow some money he or she would have to fill in a form or an organisation would have to produce a business plan and have several interviews and meetings.
Availability of advice
Electronic banking has a far less running cost than a branch banking organisation. Most financial service organisations meeting their customers through call centres. Some financial advisor's do home visits to give advice to their clients to tell them what they can give them with their changing financial needs, therefore suiting the consumers personal needs and business needs.
Clarity and impartiality of information provided
Under the financial services act of 1986 the employees working in the financial services department should:
- Keep records of the advice given to the customer on the specific dates and the reasons given for the advice.
- Know the customers so advice can be offered related to the personal financial circumstances
- Give the best quality advice available to the customer so that the appropriate services are recommended for the customer
- Explain all the risks which are involved so they are aware of all the risks which could arise
When considering a package for a customers. This helps evaluate the success of how well the financial providers are meeting the needs of the customers. One of the biggest thing has to be taken in to account is that the customer must understand the information.
Status and size of business
Different sizes of businesses affect the organisations access to the different banking services. Large businesses or organisations are able to borrow more capital at better interest rates compared with small organisations because they are seen as a lower risk, however smaller organisations are seen to be at a higher risk.
Ease of use
Many times financial and banking services can be very hard to use so customers needs have to be met. A package has to be created with services you recommend.
Value for money
Financial service providers have to sell their products at a competitive price. Financial providers seem to offer better deals and get more customers. When recommendations are being made the main considerations are that, would the customer be willing to pay and if there is any other competitive prices form competitors, such as Barclay's current account and HSBC current account, therefore the consumer will select the most appropriate to them, which will meet their personal and business needs.
Unit 7 Financial Products and Providers