financial intermediaries by ranjitha

2. AGENDA
DEFINITION
TYPES
ADVANTAGES
SUMMARY AND CONCLUSION

3. DEFINITION
Financial intermediaries hold a very
important role in the flow of money in the
financial world. The assistance of a
financial intermediary is needed by
companies who want somebody to act as a
middle man in raising money from the
investors. Meeting up between these two
parties are often very difficult without the
help of financial intermediaries.

4. EXAMPLE OF UNICON

5. TYPES OF FINANCIAL INTERMEDIARIES
INSURANCE COMPANY
MUTUAL FUNDS COMPANIES
NON BANKING FINANCE COMPANIES
INVESTMENT BROKERS
INVESTMENT BANKERS
ESCROW COMPANIES
PENSION FUNDS
COLLECTIVE INVESTMENT SCHEME

6. INSURANCE COMPANIES
 Insurance companies concentrate on fulfilling the
insurance needs of the community , both for life
and non life insurance. These companies offer
products that allow investors to select the kind of
policies to suit their financial planning needs..
These companies also offer policies for funding a
child’s education and marriage, and providing a
steady income for the aged through annuities and
pensions

7. MUTUAL FUNDS
 Mutual funds (MFs) organisations satisfy
the needs of individuals investors through
pooling resources from a large number with
similar investments goals and risks appetite.
The resource collected are invested in the
capital and money market securities. The
returns are distributed to investors
optimising the return for the investors.

8. HOW MUTUAL FUNDS WORK

9. NON BANKING FINANCE COMPANIES
NBFCs are commonly knows as
finance companies and are
corporate bodies, which concentrate
mainly on lending activities in a
well defined area.

10. INVESTMENT BROKERS
 The main duty of investment brokers is to
transact the security sales. There are
discount brokers and full-service brokers.
They provide an opportunity online for
some individuals to promote their trades.
Aside from that they can also solicit valuable
investment advice to some clients who may
need it that time.

11. INVESTMENT BANKERS
 The main duty of this financial
intermediary is to increase monetary
amounts of companies through stocks
and bonds. Since conducting stock
offerings and issuing bonds is so
expensive, investment bankers focuses
on how they can help the firm to earn
more capital

12. ESCROW COMPANIES
This is the type of financial
intermediary that is built for the
very purpose. These companies
acts like an unconcerned party
that will hold instructions for
execution as well as the grounds
agreed for it.

13. PENSION FUND
 A pension fund is any plan, fund, or
scheme which provides retirement income.
 Pension funds are important to shareholders
of listed and private companies. They are
especially important to the stock market
where large institutional
investors dominate.

14. CLASSIFICATION OF PENSION FUND
THERE ARE TWO TYPES OF
PENSION FUND
OPEN VS. CLOSED PENSION
FUNDS
PUBLIC VS. PRIVATE PENSION
FUND

15. Open vs. closed pension funds
Open pension funds support at
least one pension plan with no
restriction on membership
while closed pension funds
support only pension plans that
are limited to certain employees

16. CLOSE PENSION FUNDS
Closed pension funds are further
subclassified into:
Single employer pension funds
Multi-employer pension funds
Related member pension funds
Individual pension funds

17. Public vs. private pension funds
 A public pension fund is one that is regulated under public
sector law while a private pension fund is regulated under
private sector law. In certain countries the distinction
between public or government pension funds and private
pension funds may be difficult to assess. In others, the
distinction is made sharply in law, with very specific
requirements for administration and investment. For
example, local governmental bodies in the United States
are subject to laws passed by the states in which those
localities exist, and these laws include provisions such as
defining classes of permitted investments and a minimum
municipal obligation.

18. COLLECTIVE INVESTMENT SCHEME
 A collective investment scheme is a way
of investing money alongside other investors in order
to benefit from the inherent advantages of working as
part of a group. These advantages include an ability to
 hire a professional investment manager, which
theoretically offers the prospects of better returns
and/or risk management
 benefit from economies of scale - cost sharing among
others
 diversify more than would be feasible for most
individual investors which, theoretically, reduces risk

19. ADVANTAGES OF FINANCIAL
INTERMEDIARIES
 There are 2 essential advantages from using
financial intermediaries:
 Cost advantage over direct
lending/borrowing
 Market failure protection the conflicting
needs of lenders and borrowers are
reconciled, preventing market failure

20. SUMMARY AND CONCLUSION
 Financial institutions (intermediaries) perform the vital role of
bringing together those economic agents with surplus funds who
want to lend, with those with a shortage of funds who want to
borrow.
 In doing this they offer the major benefits of maturity and risk
transformation. It is possible for this to be done by direct contact
between the ultimate borrowers, but there are major cost
disadvantages of direct finance.
 Indeed, one explanation of the existence of specialist financial
intermediaries is that they have a related (cost) advantage in
offering financial services, which not only enables them to make
profit, but also raises the overall efficiency of the economy. The
other main explanation draws on the analysis of informat finance

21. THANK YOU
RANJITHA J