Why Financial Services exist and what they offer

Starting to get advice and becoming an investor can feel daunting, but it’s not often that difficult. Having said that, you need to understand a few basics to pick the right services for you. Let's first have a look at the different types of service providers.

There are many types of financial institutions, many of which can provide financial advice. What they can do and how they’re regulated vary around the world. It’s important to be familiar how the rules around financial advice work in your country, as they can vary a lot. Here, we’re concentrating on the US market.

High street banks in the US have recently re-entered the financial advice arena. Many sell off-the-shelf funds via online tools; some offer the chance to buy shares, with an advice service for wealthier customers (although this tends to be restricted, rather than independent, advice). They can be very helpful for those who want to make straightforward investments, while they go about fulfilling their other saving and banking needs.

These provide all their services online and through apps on mobiles and tablets. Those services are generally automated, including real-time updates, but with customer support through messaging or in-app chat. These generally offer most of the services that high street banks do, but because they don’t have physical branches, they can afford to charge lower fees. The lack of overheads means that some of them can pay higher interest rates, too. 

Banks with wealth managers are often known as private banks. They specialise in advising very wealthy people (including those with complex finances) on their money and investments. People with this level of wealth (normally considered to be around $1 million in cash or assets that can be sold quickly) are often referred to as high-net-worth individuals (HNWIs).

Corporate banks serve businesses, which often have complex needs, such as managing large lines of credit, and complex import and export transactions. To make sure transactions run smoothly, businesses also often work closely with investment banks. These work for businesses, other organisations, hedge funds, governments and, in some cases, individuals. They offer advice and research on financial markets and support complex business deals like mergers and acquisitions, companies that want to become publicly owned (IPOs), hedging, and debt financing.

Independent financial advisers (IFAs) can look around the whole market to find the investments and other financial products that are right for your particular circumstances. They can also help you plan how to save, invest or otherwise use your money to achieve your future goals. In the UK, financial advisors must be registered with the Financial Conduct Authority. In the US, the Financial Industry Regulatory Authority (known as FINRA) regulates financial advisors, though depending on your speciality, you may need to register with different organisations or agencies. 

We have covered the five main types of financial services providers and provided an overview of what they typically offer.

Think about what your financial services needs are and whether your current provider covers all of them. How happy/satisfied are you with what you have been receiving?