Financial Services

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Financial Services

Introduction to Financial Services

1.0Financial Services is a growing industry, which provides for the financial needs of individual consumers and businesses. This unit explores the needs of and products available for both the consumers and businesses. The term financial service covers a wide range of products including accounts for depositing money, loans, savings and investments, pension and financial advice.

Financial Services for individual consumers are available from banks, building societies and also from organizations such as supermarkets and insurance companies, over the counter, by telephone or over the Internet.

Businesses have financial needs when they start up, expand and carry on day-to-day business activities. These needs include financing, insurance, bookkeeping, payment services, investment and general financial advice. A variety of financial institutions can provide these services banks, insurance and investment companies and firms of accountants.

In this assignment I will produce a report which analyses the financial needs of three different types of customers and investigate the ways in which these needs can be satisfied by a range of financial service providers. Two of the customers are personal customers of contrasting types. In this case I will be talking about a graduate from university and parents of two children. I will estimate their likely expenditure and income in the form of a personal budget.

In the 2nd task I will recommend how those needs can be met and from which type of financial institution (an assessment of the cost, returns, risks and benefits of the products).

To: Business Studies Department of S.G.M                Ref: 1122

From: Demet Gocer                                Date: 02/11/04

Title: Analysis of financial needs of a graduate from university and a married couple both employed with children.

  1. Terms of Reference

On Monday 7th September 2004 , I was asked to write a report on financial services by the business studies department. This report is written by Demet Gocer, and is based on an analysis of two customers, and an estimate of their likely income and expenditure, in a form of a cash-flow forecast, and an assessment of their financial needs, I also need to identify the financial service needs of a business, and explaining how the size of an organization can be a significant factor. The final part of the report will include how the advances of technology has affected the level of customer service provided to all three customers by the financial service providers, and I also need to explain how the financial service providers chosen in the report are regulated under current legislations. This report is due back on the 10th December 2004.

1.2Financial service providers

Below are some of the financial providers

  • Investment companies
  • Insurance companies
  • Government

I will talk briefly about each one and explain the benefits and the disadvantages of each.

Investment companies

Investment companies provide people with wide range of product types, to meet their certain needs.

People that have money to invest should know clearly what they want to do, achieve for example:

  • Capital growth
  • Income
  • Or both

The investment company they prefer should help them meet this objective, baring in mind a number of other factors such as the persons risk profile, the amount that can be invested and how long for.

Insurance companies

Insurance companies provide policies, designed to pay out if some particular event happens. They offer products aimed at satisfying our needs for protection.

People may want to ensure against:

  • Damage to your house through fire
  • Breakage or loss of your possessions
  • Death of the main family earner

Insurers charge a premium for the policies their customers take out, which is effectively the price the customer pays for the protection he has obtained.

Some premiums are one off amount (single premium policies)  but are paid for on an ongoing basis.

The government

The government is one of the most important providers, for many people. However it doesn’t fit precisely into the category of commercial financial provider. In many ways it is a complementary to the commercial sector-it fills in the gaps that banks, building societies, insurers etc doesn’t fill

1.3Procedure

In this assignment I have used several sources of information; I have collected leaflets on loans, overdrafts insurances from different banks, and compared them in order to provide my customers with the best possible advice. I have also visited the Tescos website and other websites that are relevant, to find out more information on benefits risks, and costs. Another way I managed to get hold of information is through the library books.

Task 1; Analysis of two personal customer’s income & expenditure in the form of a personal budget and an assessment of their financial needs

1st customer

Graduate from university

The first person I will be talking about is a graduate from Brunel University that has studied Business Management. Martin lives on his own, pays 350.00 pounds rent every month, the water rates are included in this price. He occasionally goes to visit his parents during weekends.

At the moment Martin doesn’t have a car, so he uses London Transport, and spends up to£50.00 every month as he buys a weekly travel card, he prefers to buy a travel card as he goes out during weekends too.

Martin had been given a student loan when he was at university and as he has managed to get a full-time job at a bank starting 1st October 2004, he will have to pay back 270.83 pounds every month, he is going to get paid £450 a week. He currently holds a current account with Barclays and has £650 in his account.

Martin is also considering to buy a new car, and as this is a very expensive asset, he will not be able to afford it in the short term he will need to take out a loan from a bank, and pay back within a certain amount of time but obviously with an interest. I will be talking about this in more detail later on in this task.

According to the cash flow forecast Martin will not have any financial needs during the year, as he is working and as he lives on his own, but as he is considering to buy a car, I would advise him to take out the loan in April as it is the middle of the year, where he would have put some money aside, for himself, therefore he will never have financial difficulties.

1.4I have also researched a family’s income and expenditure on a yearly basis. Mr. and Mrs. Reynolds have been married for over 15 years, and are both employed in different business sectors.

Mr. Reynolds is an accountant and works full time for a well-known Accounting firm, and Mrs. Reynolds is a nursery teacher. They currently hold a Current  Account at Barclays and have £1,700 in their bank account.

 As stated above Mr. and Mrs. Reynolds are both employed, but they are planning to buy new furniture and redecorate the house, which is going to need a large sum of money, which at the moment they cannot afford so they are likely to take out a loan from the bank, later on in this task I will be giving them alternative choices on taking out a loan from different banks, and which one is less risky and easy to pay back.

2.0

An assessment of their financial needs:

Martin and the Reynolds

Firstly I believe they should identify their financial needs, and avoid wasting time pursuing occupations that cant meet their bottom line financial needs, they can also try to cut down on non-essential expenses such as entertainment, but continue to put aside a little money for fun, and also try to postpone expenses whenever possible especially major purchases such as buying a brand new car, do take  care of all the critical needs such as illness and car repairs, and finally don’t use their credit cards, take out a loan instead, but only they are sure that they will pay it off immediately.

Both Martin Cox and the Reynolds family have financial service needs, but one that is pretty obvious is most probably Banks, because they all hold bank accounts for several reasons:

  • To keep their money safe
  • Easier method these days to pay off bills

And many more benefits.

“Living within our means” is a goal we all should strive to achieve. It’s absolutely vital when you’re between jobs and don’t have much savings to tide you over. It means spending only what you have and saving up to buy items that you can’t currently afford. It means relying on loans only to pay large ticket items, such as a house or a car like Martin, or the Reynolds family that want to redecorate the house. This means paying credit cards in full each month. They both need to take out a loan in order to buy a new car and to redecorate the house, later on in this chapter I will be making recommendations on how these needs can be met and from which financial institution.

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There are various types and sources of finance that these customers can use. The banks are the largest providers of finance to all types of businesses. Forms of lending vary from bank to bank, and there are various schemes and procedures when they have to be paid back. A bank will be able to arrange:

  • Overdrafts
  • Factoring services
  • Short and medium term loans
  • Leasing for equipment purchase and hire purchase
  • Commercial mortgages
  • Venture capital

Financial advisers

Financial advisers are able to recommend products from a variety of providers, ...

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