Section B - Explore the personal finance sector Flashcards Preview

Business - Unit 3 (Text Book) > Section B - Explore the personal finance sector > Flashcards

Flashcards in Section B - Explore the personal finance sector Deck (53):
1

What are the different types of financial institutions?

1) Bank of England
2) Banks
3) Building Societies
4) Credit Unions
5) National Savings and Investments
6) Insurance Companies
7) Pension Companies
8) Pawnbrokers
9) Payday loans

2

What are the advantages of the Bank of England?

Responsible for protecting the financial stability of the economy as a whole
Sets interest rates at a level designed to help achieve a stable economy
Lends to banks

3

What are the disadvantages of the Bank of England?

Not a bank for members of the general public
Can raise interest rates making borrowing more expensive

4

What are the advantages of Banks?

Offer a range of services and account types
Provide a secure place to store money
Pay interest on credit balances on most types of accounts

5

What are the disadvantages of Banks?

Savings are only protected up to the value of £85,000, so if a bank goes bankrupt savings above this would be lost
Profit-making organisations owned by shareholders, therefore costs to individuals may be higher than necessary in order to fulfil shareholder objectives

6

What are the advantages of Building Societies?

Offer a range of services and account types
Provide a secure place to store money
Pay interest on credit balances on most types of accounts
Owned by members and therefore costs can be kept down allowing for higher interest payments.

7

What are the disadvantages of Building Societies?

Savings are only protected up to the value of £85,000, so if a building society goes bankrupt savings above this would be lost
May lack the business drive of a commercial bank.

8

What are the advantages of Credit Unions?

Offer a range of services and account types
Provide a secure place to store money
Owned by members and therefore costs can be kept down allowing for higher interest payments
Often offer additional benefits to the community or a good cause.

9

What are the disadvantages of Credit Unions?

Savings are only protected up to the value of £85,000, so if a credit union goes bankrupt savings above this would be lost.
May lack the business drive of a commercial bank.

10

What are the advantages of National Savings and Investments?

Government-backed, therefore offering security on 100% of savings with no upper limit
Offers additional services/methods of savings, e.g. premium bonds.

11

What are the disadvantages of National Savings and Investments?

Rates are variable
Not as easy to access due to lack of a high street presence
Often required to give notice on withdrawals

12

What are the advantages of Insurance Companies?

Protects against unexpected losses or financial expenses.
Easy and regular monthly payments make planning easy.
Wide range of services and levels of cover to suit the needs of individuals.

13

What are the disadvantages of Insurance Companies?

Premiums are assessed on the estimated degree of risk which may be seen to penalise some members or groups of society too harshly

Profit-making organisations, therefore premiums will be charged to ensure shareholder needs are met

14

What are the advantages of Pension Companies?

Provides a structure to help plan for financial security after retirement
Deductions can be taken directly from pay and be fully or partially matched by an employer’s contribution
Experts are employed to make investment decisions

15

What are the disadvantages of Pension Companies?

Poor investment decisions by the pension company may result in a disappointing return
Money already invested in a pension cannot be released prior to the dates agreed in the policy

16

What are the advantages of Pawnbrokers?

A quick way of acquiring cash needed for a short period of time
The asset can be brought back within a set period of time
Interest is not charged

17

What are the disadvantages of Pawnbrokers?

The amount given for the asset is often substantially lower than its actual worth
If the money is not repaid within the agreed period, the asset will be sold on

18

What are the advantages of Payday Loans?

A quick way of acquiring cash needed for a short period of time

19

What are the disadvantages of Payday Loans?

Interest charges are likely to be very high
Often results in paying back a final sum substantially higher than the initial amount borrowed

20

What are the different ways banks interact with customers?

1) Branch
2) Online Banking
3) Telephone Banking
4) Mobile Banking
5) Postal Banking

21

What are the advantages of Branch (Interaction with customers)?

Opportunity to build a relationship developing trust and brand loyalty
Transactions can be conducted there and then Additional services such as advice can be offered Gives the customer a high level of confidence

22

What are the disadvantages of Branch (Interaction with customers)?

Need to travel to a branch which is likely to incur travel costs, e.g. parking or fares for public transport Restricted to bank opening hours
May be long queues plus travel time, making the process time consuming

23

What are the advantages of Online Banking?

Available 24/7
High degree of privacy Convenient

24

What are the disadvantages of Online Banking?

Takes time at the beginning to set up or apply for
Not suitable for cash withdrawals
Increased risk due to cyber crime
If just an online account, the facilities may be limited

25

What are the advantaged of Telephone Banking?

Convenient, especially to access basic functions such as checking a balance
No additional charges

26

What are the disadvantaged of Telephone Banking?

Full access may be limited to set hours.
Call centres and automated telephone systems can frustrate customers.
Higher risk of fraud and identity theft.

27

What are the advantages of Mobile Banking?

Convenient
Available 24/7
No additional charges

28

What are the disadvantages of Mobile Banking?

May need to download specific apps to access mobile banking for a particular bank.
Higher security risk due to increased risk of loss or theft of mobile devices.
Can be prone to hackers sending texts asking for bank details.

29

What are the advantages of postal banking?

Traditional method that many customers will feel comfortable with.
Does not require any additional technology or devices.

30

What are the disadvantages of postal banking?

Can be slow due to the postal system.
Post can get lost.

31

What are the organisations that protect customers rights?

1) Financial Conduct Authority (FCA)
2) Financial Ombudsmen Service (FOS)
3) Financial Services Compensation Scheme (FSCS)
4) Office of Fair Trading (OFT)
5) Legislation : Consumer Credit

32

What is the financial conduct authority (FCA)?

The FCA is an independent organisation with a remit to regulate the actions of providers of financial services.

33

What work does the financial conduct authority (FCA) focus on?

• authorisation – permitting nancial service providers to trade
• supervision – ensuring procedures and practices are in the interest of the
consumer
• enforcement – using powers to ensure standards are maintained.

34

What is the financial ombudsmen service (FOS)?

The FOS is an organisation appointed by the government to represent the interests of the consumer in disputes with financial service providers.

35

When does the financial ombudsmen service (FOS) get involved?

Becomes involved in disputes only if they cannot be satisfactorily sorted between the consumer and the financial institution prior to involving the FOS.

36

What is the Financial services compensation scheme (FSCS)?

The FSCS is the organisation in the UK that will pay compensation to a consumer of financial services if the service provider is unable to.

37

What is the Office of Fair Trading (OFT)?

The OFT is a government organisation that was established to regulate all markets, including financial markets.

38

What is the Office of Fair Trade aim?

Their aim was to encourage fair practices and health competition between financial institutions.

39

Since 2014 responsibility for financial institutions has been passed to....

Financial Conduct Authority.

40

Any firm offering credit must be registered with....

Financial Conduct Authority.

41

What are the organisations that offer financial guidance and advice?

1) Citizens Advice
2) Independent Financial Advisor (IFA)
3) Price Comparison Website
4) Money Advice Service
5) Debt Counsellors
6) Individual Voluntary Arrangements (IVAs) Bankruptcy.

42

What are the advantages of Citizens Advice?

Free service
Offers face to face as well as online and telephone advice
Wide range of areas covered.

43

What are the disadvantages of Citizens Advice?

Trained volunteers are not necessarily professionals in financial issues and therefore knowledge may be limited

44

What are the advantages of Independent Financial Advisor (IFA)?

Advice is offered by professionals in the field.
Services offered are regulated by the FCA and FOS.
Advisers will take time to understand an individual's full financial situation.

45

What are the disadvantages of Independent Financial Advisor (IFA)?

Services will be charged for
Advice offered is not guaranteed to be 100% up to date or unbiased

46

What are the advantages of Price Comparison Websites?

Easy to access 24/7
Free Service

47

What are the disadvantages of Price Comparison Websites?

Not guaranteed to be 100% up to date, accurate or unbiased
Do not always cover all of the available options Potential for bias

48

What are the advantages of Money Advice Service?

Government-funded therefore advice is free and impartial
Covers a wide range of nancial matters

49

What are the disadvantages of Money Advice Service?

Advice is only available online or over the telephone – no physical presence
Can take time to nd and understand the exact advice that is being searched for
Advice can be generic rather than personal

50

What are the advantages of Debt Counsellors?

Advice is offered by a professional who specialises in debt management
Services offered are regulated by the FCA and FOS

51

What are the disadvantages of Debt Counsellors?

Services will be charged for
Advice will focus just on debt management
rather than the whole package of nancial concerns

52

What are the advantages of Individual Voluntary Arrangements (IVAs) bankruptcy?

Helps manage debt repayment with regular payments making budgeting easier Independent advice, without bias

53

What are the disadvantages of Individual Voluntary Arrangements (IVAs) bankruptcy?

Set up and handling fees are charged for the service
Will affect future credit ratings