Financial Service Business - Research Paper Example

Financial Service Business Introduction and scope of Financial service Business Traditionally, retail financial institutions are providing banking services to individuals and small businesses dealing in large volumes of low value transactions. It focuses on providing of banking services to very all individuals and families. Many financial services firms require a person or family to have a certain minimum net worth to qualify for private banking services. Recently the concept of financial service has undergone major transformations. In the US, especially, the service industry is gaining momentum and firms are now providing a variety of services for which there are a lot of needy seekers. Therefore, I would like to start a service business in finance. The term "financial services" became more prevalent in the United States as a result of the Gramm-Leach-Bliley Act of the late 1990s, which has enabled different types of companies operating in the US to merge to form a financial service company, which expanded new horizon of the financial service industry. (Gram, L., & Bliley, B., 1999) [http://banking.senate.gov/conf/confrpt.htm] Operational Trade Plan for the Business: Nature of the industry: Retailing organisation selling financial products. Products offered: It is a type of retail store which offers selected banking products as well as personal financial services including budgeting, pension plans, children education, investment plans and advises, as well as portfolio management. The place I would like to open my business would be Charlotte, North Carolina; USA. Charlotte is the largest city in the U.S. state of North Carolina and the seat of Mecklenburg County. Charlotte's population was estimated by the US Census Bureau to be 7, 56,912 in mid-2010. The city has an annual retail sale of around $13.6 billion. [http://www.charlottechamber.com/eco-dev/demographics-economic-profile/] Features of the organisation As a part of market penetration strategy, the organisation will deal with a lot of tailor made services in areas like budgeting, investment in future, savings for retirement and children’s college, money management and investment management. There will be specially designed website for this firm, where customer can easily order the products they want. Facilities for smoother navigation and ease of payment with a variety of payment options including credit cards, paypal, Alert pay etc. will bring shopping a different experience. It will help the firm to reach a wide array of target customers. Financial Model for the organisation The following chart shows the projected sales and profit for the firm for the next financial year. Here, the company is expected to earn a net interest income figure of $3.0 million in the first year of its operation. The company also projects its net income of $1.1million from its business. One of the important elements in fixed assets is the land purchased near Charlotte, North Carolina; USA at a competitive rate of $6000 per acres. The other elements include furniture and fixtures costs $1 millions. After deducting Total liabilities and Total assets company will be having a Net Assets of $4 million which can adequately cover the future expansion requirements. Company also has employment expenses of $1 million which include the salary of six employees recruited for the management of business. Company projects cash and marketable securities of around $10 million at the end of next financial year. The detailed projection is given below: Financial Model for the Retailing organisation Income Statement Figures in Mlns Interest and similar income 3.5 Interest expense and similar charges -0.5 Net interest income/(expense) 3.0 Fee and commission income 0.7 Net trading income 0.3 Net operating income/(expense) 4.5 Employment expenses 1 Brokerage and commission expenses 0.6 Occupancy expenses 0.5 Non–salary technology expenses 0.3 Other operating expenses 0.8 Total operating expenses 3.2 Operating profit/(loss) before income tax 1.3 Income tax (expense)/benefit 0.2 Profit/(loss) from ordinary activities after Income tax 1.1 Balance Sheet Assets Cash and balances with central banks 2.5 Trading portfolio assets 0.1 Loan assets held at amortised cost 1.2 Derivative financial instruments – positive values 1.5 Other assets 0.1 Investment securities available for sale 1.2 Intangible assets .4 Property, plant and equipment 3.3 Deferred income tax assets 1.1 Non–current assets 0.2 Total assets 11.6 Liabilities Due to banks 0.9 Cash collateral on securities lent and .4 repurchase agreements Trading portfolio liabilities .2 Derivative financial instruments – negative values 1.4 Deposits 1.6 Other liabilities 0.6 Current tax liabilities 0.11 Provisions 0.2 Deferred income tax liabilities 0.1 Total loan capital 2 Total liabilities 7.51 Net assets 4.09 Source & Uses of Funds Cash flows from operating activities Interest received 4.2 Fees and commissions paid 0.6 Net receipts from trading portfolio assets and 2.6 other financial assets/liabilities Payments to suppliers 1.3 Employment expenses paid 2.8 Income tax paid 0.28 Life investment contract (expense)/income 0.1 Net cash flows (used in)/from operating activities 1.72 Cash flows from investing activities Net payments for financial assets available for 2.14 sale and at fair value through profit or loss Net cash flows used in investing activities 2.14 Cash flows from financing activities Proceeds from the issue of ordinary shares 1.3 Payments to minority interests 0.23 Repayment of subordinated debt 0.4 Net cash flows from/(used in) financing activities 0.67 Cash and cash equivalents at the end of the 2.3 financial year Note: 1. Company proposes to employ six employees with finance background on full time basis for managing of financial products. 2. Income tax is assumed to be 35%. 3. In North Carolina, land price is approx $6000 per acres. [source: http://www.landandfarm.com/search/NC/Charlotte-land-for-sale] Variety and Assortment Merchandise and prising: The assortment can carried out in the following format. Banking Investment Insurance Savings Account Demat Account Health Insurance senior citizen account Mutual Fund Money back plans Commercial bank account Deposits High Net worth Individual Term plan Corporate Banking Retirement Advices   ATM/Debit card Budgeting     Investment Management   Service offered: The following services can be offered to attract more consumers and improve the sales in financial service business. Budgeting for personal as well as business Investment management services Pension planning Portfolio management Educational loan services with lowest interest rates Salary account for corporate with high end security ATM sharing with most of the banks, which ensures convenient banking. Health Insurance services Attractive plan for HNI customers. Type of business: The ownership can be in the form of a partnership firm. The main advantages of this type of business are: a) It is easy to set up a partnership firm b) Fund raising can be done easily by increasing the number of partners. c) It will facilitate the amalgamation of varied skill sets to do retail business, and will help in the profitable growth of business. Market Segment: Our target market will be people with middle and high income. We aim to provide better financial advices to people looking for a reliable source to control the expenditure through proper planning and enhance their wealth through wise investment decisions and deployment of funds. The services range from managing individual savings account to corporate banking. Retail Strategy The strategy will mainly focus on providing high quality financial services to the customer for convenient money management. The business will also be operated through our website which will display the complete details of products on offer to the customer. It will be supported by 24*7 customer service and live chat to clarify any investment management queries. Generating Business through Online One of the good strategies to generate sales is to put the business into an online facility. First step is to create a website backed by provision for telephone support to the customers. This will reduce the running cost of the business in the long term. The service also includes 24*7 customer support to provide details on the products. It can be accessed either through telephone or contact link of the website where 24*7 live chat facility will be available. Comparative Advantages They are: Innovative 24*7 web-support. Low interest rate for educational loans. Better Mutual fund management, daily NAV calculation and free SMS services. Wide varieties of pension plans. Risk management Funding – finance raised and asset held on the balance sheet and capital allocated to the risk. Tailor made portfolio management system. Objectives and Goals: 1. To start and run a sustainable business in the financial services market. 2 To provide financial awareness among the population in the community. 3 Remain in touch with an ever evolving industry. 4 To get maximum advantages of the particular industry. 5 To build up a profitable business. Retail Location and Site Characteristics: The location of the retail shop is one of the most significant aspects to consider while starting a business. Selection of location should be based on: a) The connectivity through road. b) Footfall in the area c) The nature of surrounding business. d) Availability of other amenities like Park, Museums, bank, Cinema theatre etc e) Better parking facilities. The particular site will be always busy in nature. It will be a place where people can have easy access and also availability of other amenities. Store Layout and Design: Since it is a small business operated by six people, he best layout design will be straight Floor Plan. Straight Floor Plan: This is the most convenient and efficient store plan because of its cost effectiveness. A sample of Straight Floor Plan is given below: Meeting Room Customer service Reception Number of Employees and Their Training: The expected numbers of employees in the store will be around six and the education levels of the employees are graduation in finance and possessing relevant skillsets. Hence, it will be easy for them to understand the financial products better, assess the customers’ requirements and to provide them appropriate counsel to match their needs. Proper training will be given to the employees as a part of the recruitment process. It will generally encompass: a) Training on the company policies b) Training on code of conduct and ethical business practises. c) Training on the various financial products offered by the company and its relative advantages. d) Training on basic selling techniques e) Training on consumer behaviour f) Training on good manners and etiquettes. CRM Program: Customer is considered as the king in the market. This is especially true in retail industry. So, the growth of the business depends upon how it grows in terms of attracting and retaining customers. One always needs to remember that even a single unhappy customer may blow up an entire business. Meaning CRM, or Customer Relationship Management, is a company-wide business strategy designed to reduce costs and increase profitability by solidifying customer satisfaction, loyalty, and advocacy. True CRM brings together information from all data sources within an organization (and where appropriate, from outside the organization) to give one, holistic view of each customer in real time. [http://www.destinationcrm.com/Articles/CRM-News/Daily-News/What-Is-CRM-46033.aspx] Techniques used for CRM: 1) Sales force automation 2) Customer service and support 3) Use of social media like TV, SNS like Face book, Orkut, Twitter etc to encourage customers to interact with the company more. Conclusion The Financial services industry is a growing sector which shows frequent changes in accordance with micro and macroeconomic changes. A through financial and marketing planning is a must to be successful in the sector. The selected store location and pricing strategies with strong financial support will help to boost the sales in short span of time. Key mantra for the success of a financial business will be better administration, proper risk analysis and funding. References: [http://www.charlottechamber.com/eco-dev/demographics-economic-profile/] [http://www.destinationcrm.com/Articles/CRM-News/Daily-News/What-Is-CRM-46033.aspx] [http://banking.senate.gov/conf/confrpt.htm] Reference List Gram, L.,& Bliley Bill (1999). Text of conference Report released November,1999.Senete Banking Committee. Retrieved 1 December 2010 from http://banking.senate.gov/conf/confrpt.htm Read More