Module 1: Chapter 1- The Investment Industry: A top down view Flashcards
(12 cards)
Financial services industry
Exists to provide a link between savers/lenders/
providers of capital who have money to invest and spenders/borrowers/users of
capital who need money.
Financial intermediaries
Act as middlemen between savers and spenders.
The main financial institutions
Banks and Insurance companies. Banks
collect deposits from savers and transform them into loans to borrowers. Insurance companies are not only financial intermediaries that connect buyers of insurance contracts with providers of capital who are willing to bear the insured risks, but also among the largest investors
The investment industry
A subset of the financial services industry, includes all participants that help savers invest their money and spenders raise capital in financial markets.
Goal of economic systems
The efficient allocation of scarce resources to
their most productive uses. Financial markets and the investment industry help allocate capital, a scarce resource, to the most productive uses, which fosters
economic growth and benefits society.
Investors
Retail investors Individual investors with the least
amount of investable assets
High-net-worth investors- Individual investors with a higher amount of investable assets
Institutional investors-Organisations that invest to advance their mission or on behalf of their
clients
Financial advisory service providers
Financial planners- professionals who help their clients
understand their future financial
needs and define their investment goals
Investment management service providers
Asset managers- professionals who help their clients
carry out investments to achieve their
investment goals
Investment information service providers
Buy-side analysts- professionals who review potential
investments
Data vendors- organisations that provide information resources
Investment research providers-organisations that produce information reports
Trading service providers
Exchanges- Organised and regulated financial
markets that allow investors to trade.
Brokers- Professionals and their firms that
facilitate trading between investors,
acting as agents (they do not trade
with their clients)
Dealers- Professionals and their firms that
facilitate trading between investors,
acting as principals (they trade with
their clients)
Clearing houses and
settlement agents- Organisations that confirm and settle trades
Custodial service providers
Custodians and depositories- Organisations that hold money and securities on behalf of their clients
Four key forces that drive the investment industry are
Competition, technology, globalisation, and regulation.
