Financial intermediaries have a pivotal role to play as far as the way in which money flow in the market is concerned. When an organization or company wants to raise money from investors, they can do this with the help of a financial intermediary. In such instances, the intermediary acts like a connection between companies and investors.
Things to know about financial intermediaries
One of the most important parts of a financial market system is the financial intermediary. In the absence of the intermediary, investors will find it difficult to meet up with the entities that they invest in. The investor works as a financial intermediary to purchase a security. After that, the financial intermediary assumes a portion of this money for a fee. The remaining money is distributed to the organization or company from which the security was purchased from the investor. Intermediary bank is gaining more and more importance.
Know about the kinds of intermediaries
In the world of investment, different entities have an important role to play as a financial intermediary. For example, credit unions and banks might be financial intermediaries. Stockbrokers happen to be another example of financial intermediaries. This is because investors are provided with a way to buy stock from publicly traded companies. Mutual fund companies come under the classification of financial intermediaries. This is because the investors’ money is taken to buy stocks and securities from companies. Another type of financial intermediaries are pension funds. This is because they handle the investment process for the groups of employees of a company.
Free advice for investment
Some kind of investment money is provided to many financial intermediaries. For instance, if you happen to be working with a stockbroker, put forward questions to him about the recommended stocks. This piece of advice could be obtained from the financial intermediary. The intermediary performs the role of being a conduit to purchase securities.
Owing to the pivotal role which financial intermediaries play in the financial system, they are not free from regulation. Education to a particular level or a specific kind of certification is needed which depends on the kind of financial intermediary. For example, as far as stockbrokers are concerned, they will have to appear for a licensing exam before they begin assisting clients. A particular amount of assets will be required at all times by the financial intermediaries.
Those were some of the information that you need to know about an intermediary bank.
Sean Mckelvey on Google+