Recommending Financial Products - Literature review Example

RECOMMENDING FINANCIAL PRODUCTS Introduction A financial product is a facility through which or through the acquisition of which an individual makes a financial investment, manages financial risk as well as makes non-cash payments (Lewis, 2004). Financial products are a vital part of everyday life. They assist households manage their everyday spending, save for the future and insure against loss (HM Treasury, 2010). Companies believe that there are roles for financial products to assist consumers take responsibilities for their finances. Nonetheless, various individuals struggle to have knowledge of the impact of financial products. Thus, this paper will recommend various financial products that are available to different groups of clientele for the Coventry CU Financial Advisory. Identification of the various financial products available to different client groups Financial products for lower socio-economic groups According to Consumer Market studies (2015), rates of saving have been falling steadily. On the other hand, borrowing is on a steady increase. Over the last fifty years, dramatic changes have been in attitudes towards financial planning. Subsequently, the poor have been affected more. Individuals now borrow far more readily than they save. However, to try and alleviate this attitude, especially among the poor, organizations such as the Bill and Melinda Gates Foundation are offering financial products that the poor can manage. Some of the financial products recommended for the Coventry CU Financial Advisory for their lower socio-economic groups are stated below Deposit savings accounts According to Prina (2013), savings promote accumulation of assets, thus assisting to create a buffer against shocks. Deposit savings accounts also help to relax constraints on credit hence offering a significant pathway out of poverty. Even though increasing evidence shows that the poor are portraying willingness and have the capability to save, they do so largely through informal methods. Such methods comprise of storing their cash at home, purchasing livestock and goods that are durable and joining savings clubs that are illiquid and are a lot riskier than bank accounts. Therefore, they should be encouraged to have deposit savings accounts (Prina, 2013). Deposit savings financial products will benefit the market and will deliver clear benefits to the consumers. It comprises of introductory bonuses, stepped interests and early withdrawal penalties. Protection As stated by HM Treasury (2010), protection also has a significant part in assisting clients to build up fiscal security. Many individuals cannot access protection in case of income loss by them or their dependents. The company should have a clear benefit in offering individuals financial protection products that are easy to understand to assist them in understanding what they are purchasing and the paybacks. Microfinance Institutions Savings As it has been seen, assisting individuals save their way out of poverty can be much cheaper and less perilous than assisting them borrow their way out of poverty. Microfinance institutions are now focusing on savings so that the poor can opt for what is best for them. Consequently, these institutions have developed clear recommendations for improving the quality and, therefore, the quantity of access to financial products for the poor (Karlan, 2010) According to research, despite the fact that poor low socio-economic individuals are excluded from services of banking, they can save, get insurance or credit and make payments. These microfinance institutions provide basic financial services to individuals with low income, assisting them finance productive activity and insure against the risk of unanticipated circumstances. Microfinance institutions are now seen as having the potential of making commercialized institutions even though charitable and social organizations initially pioneered it. Therefore, the high net clientele may find this appealing. Securities as a financial product According to The Financial Product (2007), securities cover all direct financing companies’ instruments, states or entities of the public and banks. Securities represent a medium or short-term share claim or long term claim, or a share in the company capital (The Financial Product, 2007). It is usually an investment instrument for the buyer of the security. Securities financial product provides insight into the sentiment of the market and transparency of trading from a macro to the individual level of stock. Investing in a securities market is one of the principal ways to create wealth through appreciation of capital. This is as a result of an increase in the value of securities over time. Therefore, the principal is completely secured since these accounts are insured. Therefore, for security in households to be improved, clarity and confidence in financial products is needed. Individuals should be able to choose the correct financial products for their needs and be able to trust the market to give them a fair deal. Products for High Net Worth Individuals Most high net worth individuals have a strong sense of ideals and individual values. They have value fiscal security more than status. Therefore, they have a tendency to choose financial products that generate a fiscal return. Thus, Coventry CU financial advisory should understand the values, desires and needs of high net worth individuals. Some of the products recommended for high net worth individuals are discussed below Private banking Wealthiest clients’ groups is transforming rapidly. Lucrative activities of business and unprecedented expansion of the economy have created many high net worth clients. The high net worth individuals segment needs more financial products that are diversified. Divisions of private banking offer enviable perks to high net worth individuals (Claes Bell, 2015). These clients generate huge amounts of cash. High net worth individuals are the most lucrative and the most perspective clients groups for all kinds of fiscal institutions. The key to success in this multifaceted market lies in complete understanding of the requirements and behaviors of these most urbane groups of clients in the banks. For banks dealing with private banking to have the intentions of serving high net worth clientele profitably, they have to adjust their attitude towards different types of high net persons. They should also satisfy their needs correctly (Grzeskiewicz & Kozlinski, 2004). Investment Banking Investment banking services assist clients in establishing their businesses and improving the value of their enterprises by combining SMBC’s investment banking unit proficiencies with other company strengths (Sumitomo Mitsui Financial Group, 2014). Because this is to create optimal solutions that meet their different needs that comprise of financing, management of assets, hedging of risks, restructuring of businesses and settlement. Investment banking handles serving government and corporate clients in raising capital and also mediating transactions of mergers and acquisitions. Additionally, investment banking is all about the high volume. Their clients are high net worth individuals and institutional investors. However, even though it may seem like a societal area that only matters to the wealthy and affluent, the activities of the bank play a significant role in the global economy. It assists financial markets function smoothly. Evaluation of the use of financial products to meet the needs of a client Development of financial products has taken place in a variety of market landscapes. Development of financial products varies per the type of financial institution and orientation and competitive advantage in the market. The recommended financial products should be able to support consumers in their making of decisions and to aid competition. Also, the financial products should be designed to be straightforward as possible to assist consumer understanding of the various features of each product. Financial products should also assist consumers to compare simple financial products from various providers. The financial products according to HM Treasury (2010) should be established so that they deliver against three clear goals. These objectives comprise of ensuring that consumers have knowledge of the products they need, to assist them make improved decisions and encourage market competition. Also, comparing across diverse features can be challenging even for sophisticated individual clientele. Financial Advisory Coventry should guarantee that complexity is not an obstacle in saving. Financial services and products matter because they have a huge capability to bring the poor out of poverty. Also, they can safeguard individuals against risk. Connecting the poor to systems of payment can bring 2.5 billion more individuals into contact with the rest of the world and tap their labor, cash and brainpower (Groenfeldt, 2013). Conclusion To conclude, financial products are a crucial part of everyday life. Companies believe that there is a role for financial products to help clients take responsibilities for their finances. The report has outlined the various financial products I have recommended for Coventry CU Financial Advisory for their different groups of clientele. The financial products recommended are both for individuals from lower socio-economic groups and high net worth individuals. For instance, deposit savings account, securities, and microfinance institutions are recommended for the lower socio-economic groups. On the other hand, private banking and investment banking have been recommended for the high net worth individuals. I have also evaluated the use of financial products to meet the needs of clients. I have stated that the financial products should be able to support clients in their decision-making and to aid in competition. The products should also be designed to be as straightforward as possible and should also assist the clients to compare fiscal products from different providers. Reference Bell, C, 2015, Private banking offers perks to wealthy. Available at: http://www.bankrate.com/finance/savings/private-banking-offers-perks-to-wealthy-1.aspx Consumer Market Studies, 2015, How it became easier to borrow than to save, Available from: http://www.charisma-network.net/finance/how-it-became-easier-to-borrow-than-to-save (Accessed 23rd May 2015). Groenfeldt, T, 2013, Reaching Out To The World’s Poor With Financial Services. Available at: http://www.forbes.com/sites/tomgroenfeldt/2013/10/02/reaching-out-to-the-worlds-poor-with-financial-services/ (Accessed 23rd May 2015). Grześkiewicz, G., & Koźliński, T. (2004). High Net Worth Individuals-The Clients of Private Banking. In The 8th International Conference of Doctoral Students, Brno University of Technology, Brno. HM Treasury, 2010, Simple Financial Products: A consultation. Available at : https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/81570/simple_financial_products_consultation.pdf (Accessed 23rd May 2015). Karlan, D, 2010, Helping the Poor Save more. Available at: http://karlan.yale.edu/p/FT.PoorMore.pdf (Accessed 23rd May 2010). Lewis, K, 2004, When is a financial product not a financial product? COMPANY AND SECURITIES LAW JOURNAL, 22(2), 103-127. Prina, S, 2013, Banking the poor via savings accounts: Evidence from a field experiment. Case Western Reserve University, Weatherhead School of Management Working Paper, available at: http://faculty. weatherhead. case. edu/prina/pdfs/prina_savingsaccounts_2013. pdf. (Accessed 23rd May 2015). Sumitomo Mitsui Financial Group, 2014, Annual Report, Available at: http://www.smfg.co.jp/english/investor/library/annual/h2603annu_pdf/h2603_e_00.pdf (Accessed 23rd May 2015). The Financial Products, 2007, Financial products, Available at: http://www.fimarkets.com/pagesen/financial-products.php (Accessed 23rd May 2015) Read More