What is called financial services? Why are they needed? What are they like? What are public financial services? Here is a short list of issues that will be addressed in this article.
Let's start by defining the term that interests us. So, financial services are operations related to the relevant assets that are carried out in the interests of a third party. In this case, the frequency of their provision is of great importance. Financial assets are understood as cash, debt instruments, securities, etc.
What could such an operation be? For example, assisting in paying off a debt. In general, most of the mentioned activities are associated with debt obligations.
Financial services are a sector of the economy with great risks. But at the same time, it promises significant profits.
What are they?
Financial services have a number of specific features:
- Perceived as the activities of an individual or legal entity.
- Do not have a material form of expression.
- Despite the abstract form, they acquire concrete expression in the process of buying / selling or established contractual relations.
- A positive effect is already evident during the provision of financial services.
- The time of its provision and consumption, as a rule, coincide.
What fits this description? Trust management of financial assets, issuance of payment documents, cards, traveller's checks, currency exchange activities, leasing, raising funds with their subsequent return, loans, guarantees, sureties, money transfers, insurance, funded pension provision, securities trading - and this is also not a complete list.
When a person hears the terms “portfolio” and “financial services”, this is usually associated with securities. But not so simple. In this case, “portfolio” means the totality of services that are provided to people as part of financial services. Depending on the direction, there are:
- Direct services. Their feature is a direct focus on meeting the specific needs of the client (insurance, commercial, investment, payment).
- Indirect (related) services of the first type. They do not provide for the client to receive additional income, but provide a more comfortable interaction. So, they mean issuing plastic cards, managing an account using a phone and the like.
- Indirect (related) services of the second type. Their feature is to provide the client with additional income and / or cost reduction when working with paragraph 1. As an example, capitalization of deposits can be cited, in which interest is added to the account, and money also begins to run into them.
Separation of services by their level of complexity
In this case, they are divided into four types. The provision of financial services, not to be forgotten, is a rather costly venture. Therefore, a division was made into types that allow a more objective assessment of one's strengths in terms of work and interaction with the client. That's what came out of it:
- These include aspects of activities that are oriented towards meeting the needs of a wide mass of customers and do not require any professional knowledge or special skills. This is the opening of accounts, and the transfer of money, and currency exchange.
- The second level is aimed at people who have certain knowledge of working with banks and their products. Examples include e-commerce systems, trust management, securities trading, property management. In this case, in addition to knowledge, it is also necessary to have special technical equipment like computers and software.
- In this case, financial services are a tool to meet the special needs of customers. The latter need to have a certain level of training in order to be able to use these services. An example is trade in funds and the formation of a portfolio of securities with a certain level of profitability and risk.
- At the fourth level of complexity, the consumer of these services is a very limited number of customers. To succeed, they need to have knowledge of financial planning and risk assessment. Then you can get access to exchange trading or the opportunity to earn on currency quotes.
As you can see, the services listed above require some knowledge. And since most people who want to do this do not have them, they turn to specialists. The financial services market is now competitive. But at the same time, alas, there are quite a few scammers. Therefore, when choosing a partner for interaction, it is necessary to objectively assess the current state of affairs, get acquainted with the history of its activities, various aspects of work and only then make a choice.
What should be understood as a state financial service?
The general list is given earlier. What is the difference between what the state provides and offers from the private sector? Let's look at such an example.
We have a man. He is a scientist and inventor. For the opening will receive a significant amount of money. But, alas, he lacks them for a four-room apartment for his entire family. Private companies offer him a loan at twenty percent per annum. And the state is ready to provide preferential terms (after all, he is a scientist!). And offers to pay only four percent per annum.
Of course, the choice will be made in favor of the second option. After all, what does a private organization offer? Financial services cost her dearly, but the state offers a sparing regime.
And it's all?
Of course not. Relatively, this can also include state-owned enterprises that carry out financial activities; there are also many other aspects of support. But at the same time, two main areas can be distinguished:
- on general terms.
Let's look at an example: there is a state bank. It operates on market conditions, competing with commercial entities. But if government officials receive orders for preferential financing of certain groups of the population (the same scientists), then he will do it. And he will act solely according to the orders. So, if a housing loan is provided, then the scientist will receive a loan of four percent. But the financial protection service itself will cost him at the market price.
The financial services sector is an integral part of the modern economy. You can live without it, but it will be difficult. When researching a sector, one cannot help but see that it is segmented. Separation is carried out according to the types of financial assets.
Most often, intermediaries who operate in this market are divided as specializing in credit, currency or insurance activities. In this case, acceptability is important, that is, the degree to which the product or service corresponds to the financial condition of the client. In this case, they are guided by his investment tasks, level of risk tolerance, knowledge, needs and experience. Each service should be evaluated for convenience, appropriateness and transparency.