7 Factors to Consider Before Choosing Financial Advisors

 A Financial Advice Market Review survey found that 1 in 10 adults in the UK sought financial advice within a 12 month period.

We’ve harped on before about why everyone needs a financial advisor, but how do you go about choosing financial advisors?

What you need in a financial advisor will vary depending on your individual circumstances. That being said, there are seven simple rules to follow to find the best financial advisor for you.

1. Know What You Need

You’ve decided you need a financial advisor, but what services do you require from them?

Are you looking to invest wisely, to plan for retirement, or do you need advice on taxes? 

Financial advisors offer a wide array of financial services, from investment management through to business finance plans. Only you know exactly the advice you need, but be clear on this before you even begin looking for a financial advisor. The normal financial advisor services are:

  • Debt Management
  • Budgeting
  • Health and long term care planning
  • Estate planning
  • Retirement
  • Inheritance
  • Tax planning
  • Investments

Whether you need specific advice on one aspect of your finances or a variety of services, the financial advisor you choose should be able to cover all these areas. Additionally, if you know you’re looking for long-term advice, keep this in mind when choosing. 

2. Financial Advising Experience

Frustratingly, nearly anyone can call themselves some kind of financial advisor. It may come under a different heading such as a financial coach or planner, but these titles come with minimum qualifications. 

Due to this, it’s important to really know your potential advisor’s experience and qualifications. This ensures your money and assets are in the best hands possible. 

A good financial advisor’s website should have their qualifications, education, and experience listed. Review all of these things to figure out whether their knowledge will help your unique needs. 

Not all qualifications are equal. In particular, depending on your location, the qualifications to ensure your advisor has are:

  • The Certified Financial Planner Designation
  • Certified Public Accountant
  • Enrolled Agent
  • Chartered Financial Analyst
  • Accredited Financial Counsellor

3. Comparing Advisor Fees

It should go without saying that you should do research into different fees for any service. This is never more pertinent advice than with financial advisors.

This is because financial advisors get paid in a few different ways, and sometimes this can be at odds with your best financial interests. For example, if your advisor is getting paid on a fee-only basis regardless of their advice, they have less incentive to grow your wealth. Whereas if they were paid on a commission and fee basis, they have more incentive to invest wisely to increase their commission. 

Typically, a financial advisor will be paid one of three ways:

  • Fee-only
  • Commission
  • Fee-based (a mix of both)

You need to figure out what would work best for your individual circumstances.

4. Transparency

While we’re talking fees, it’s time to talk about transparency. Long gone are the days of the elusive and mysterious investment elite. If your financial advisor isn’t being upfront, ditch them.

A good financial advisor will be transparent about all fees to be charged. You should have this in writing, and they should be happy to give it to you.

Not only transparency about fees but also plans. You should be clear on what plans your financial advisor will make, as well as how regularly you can expect updates, reports, and meetings. 

5. References and Reviews

Even now, word of mouth might still be one of the best ways to find a financial advisor. But if you don’t happen to know anyone, the internet is a great substitute.

As well as checking qualifications and education, you should check reviews. On their site, on Trustpilot, and on Google. 

6. Performance reporting

As we mentioned briefly, you want regular reports on your assets and wealth. But it also needs to be in a digestible format. That is to say, you don’t want an array of random charts and figures you can’t actually understand.

You need clear, concise reports on performance, transactions, and holdings. You can choose how regularly you want to receive these. Whether it’s monthly, quarterly, or bi-annually, your financial advisor should be happy to provide them. 

As we live in a digital world, many of these offerings may be in online services. You should know what financial planning software is in use and whether you will have access to it.

7. Talk to Your Advisor 

Before signing up for anything, talk to your advisor in depth. If they’re part of a firm, know exactly who will be running your account and who you’ll be dealing with. Get to know them.

Ensure you get an initial meeting – whether by phone or in-person – and know exactly how often you’ll be speaking to them. Is it once a month or once a quarter? Will they regularly be contacting you with updates?

This is particularly important if you’re looking at long-term financial advice. Your life will change due to work, relationships, children, and so on. You need to have regular contact with your financial advisor to take these changes into account and amend your plan accordingly. 

Choosing Financial Advisors

Using our tips above, you should be able to find a reliable and trustworthy financial advisor to manage your assets. Make sure to take your time choosing financial advisors, and avoid any cheap pressure tactics from firms. 

For more financial advice, make sure to see our financial section to keep you up to date with the latest news.

Trust the Experts: 7 Benefits of a Financial Adviser

Plenty of people feel out of their depth when it comes to money management. Whether you’re looking at pensions, insurance, mortgages, or savings and investment products, there are so many options available and it can be overwhelming. Recent research has shown that up to one-third of people in the UK don’t have a pension. It’s really critical to plan for the future and many people could benefit from professional financial advice. The benefits of a financial adviser include bespoke advice on defining your financial goals, building wealth, and planning for the future.

Read on to find out more about the value of good financial advice. 

7 Benefits of a Financial Adviser 

A good financial adviser will begin the process of working with you by undertaking a fact-finding exercise. They will find out more information about your circumstances and goals and any financial products you already have.

One of the most important things is to assess your risk appetite. How much are you prepared to lose in the investment market? Once all of this is established, they will go on to recommend financial products that are suitable and affordable for your current circumstances.  

Let’s look in a little more detail about the specialist advice available from financial advisers.  

1. Product Recommendations and Protection 

If you take financial advice before buying a specific product, you should end up with a product that meets your personal needs and is most suitable for your circumstances. Using an adviser may also give you access to a range of products that you may not have been able to access on your own.

You also have protection if something goes wrong. If your adviser gives unsuitable advice or has not acted in your best interests, you can complain to the Financial Ombudsman

2. Objective, Expert Advice 

Lack of objectivity can be a major issue in investment decisions. A professional adviser will make their decisions based on analysis and objective decision-making, without emotion or panic. An experienced professional will know when to hold their nerve if the market looks a little shaky, enabling sound long-term decisions.

Financial advisers are full-time professionals with many years’ experience. No matter how hard you try, it’s hard to keep up-to-date on all the latest developments in taxation, investment opportunities, and market developments. You should be able to rely on your financial adviser to give you the most well-informed advice. 

3. Savings Advice

Let’s look at some of the areas where financial advisers can add value to your decision-making process. In terms of savings advice, it’s easy to get general guidance on what your savings options are. Financial advisers will go further and offer advice on particular products.

A financial adviser would take you through specific options of savings accounts, ISAs and investment opportunities, and recommend one that suits your personal circumstances best. 

4. Investment Advice 

It’s important to note that some financial advisers are independent and offer a full range of products from the market. Others offer a more restricted service and only have a limited range of products or providers. 

Investment products are harder to understand than cash savings products, and taking advice can ensure that you’re aware of all the options available to you. If you have limited time to undertake research, or you lack the skills and knowledge to make the best decisions when it comes to investing, then financial advice in this area is a good idea. 

5. Long-Term Financial Planning 

A key part of getting your personal finances in order is ensuring that you plan for the future. Pensions are long-term investments and it’s important to understand the funds you’re investing in and any associated risks. 

A financial adviser can help you to make decisions about personal pension products or boost your existing pension. If you’re considering combining different pension pots, it’s important to get expert advice so that you are fully informed on how each product works and what plan is most suitable for your long-term financial security. 

6. General Money Management Advice 

A good financial planner can also help you with general finance tips. This could include how much you need to save in your emergency fund and what your long-term savings target should be. They can also help with budgeting tips – what do you need to do differently to improve your financial circumstances? 

Financial advisers can offer banking advice to make sure that your current bank is offering the services you require. This could include looking at bank charges including overdraft fees, the availability of digital and face-to-face services and any additional services offered with your bank account. 

Financial advisers can also help to identify any changes you could make to improve your tax situation. This includes long-term tax and estate management planning, as well as any tax implications from investments. 

7. Peace of Mind 

Possibly the greatest benefit of using a financial adviser is that it gives you peace of mind. You can relax, knowing that your money is in a safe place and that your financial adviser will help you to deal with any challenges which may arise. 

You can also feel secure in the knowledge that, should your life circumstances change, your financial adviser ill be able to help you navigate through the transition. This will reduce stress and help you to continue on your path towards financial freedom.

Choosing a Financial Adviser 

If you’re now sold on the benefits of a financial adviser, the next step is to choose one. You need to ensure that you fully understand their fee structure. Some charge by the hour, while others charge a flat fee for a specific product or take a commission on products that you buy through them.

You should also ensure that the financial adviser you use is fully qualified and registered with the Financial Conduct Authority. This means that they meet the required standards and also that you have some protection if you’re unhappy with the service provided.

Staying Informed 

Even with the benefits of a financial adviser to help you make financial decisions, it’s a good idea to try to stay as well-informed as possible about what’s going on in the finance world.

For all the latest news and views on investments, banking, and finance, be sure to check out our blog.

Follow These Holiday Budgeting Tips to Make Your Next Trip a Success

Overspending on a holiday is a very easy trap to fall into. The excitement of being in a new place, seeing sights, and eating new food can quickly total up. However, you can do all of these things without going over your budget. By implementing a few ideas, you can make sure your holiday is not ruined by money and cash worries. Below, we discuss our tips for holiday budgeting. 

Be Flexible

When booking transport and accommodation, you can save a lot of money if you are able to be flexible. Flights and train tickets can drop drastically if you can shift around days and times. Trains are much cheaper if you travel off-peak and book well in advance. 

Try to utilize price comparison sites. They can get you the best deals on flights and accommodation and often have offers available. 

Luggage

Luggage can really add money to a flight, particularly when flying with budget airlines. Most of their prices are advertised without hold luggage and strict hand luggage restrictions apply.

Use this to your advantage by only booking the number of cases needed. If you and your partner can fit the children’s clothes in two cases, then you can save money on expensive hold luggage places.

If you are traveling somewhere for a longer period of time, it can be cheaper to send clothing via post than book extra hold luggage. Look at parcel comparison sites using the dimensions and weight of your package and send them to your destination.

Plan for ATM Withdrawals

When withdrawing money from abroad, prices can vary drastically. There are three factors to consider; ATM fee, bank fee, and exchange rate.

The ATM fee is the money charged by the ATM operator for the use of their machine. These fees can vary from free services to extortionate prices. Ask locals in the area which are the free ATM machines and use them. 

You should also check the bank exchange rates from your currency to the local currency. Most bank ATM machines will have fairly reasonable exchange rates, but independent ATM operators can charge high fees.

Next, consider the charge that your own bank makes for taking money out abroad. To minimize a loss on all counts, always keep ATM withdrawals to a minimum, withdrawing as much money as you possibly can to maximize your loss.  

Holiday Budgeting

Before the holiday starts, count up the money you have saved. Deduct any money for transport or hotels, then divide the rest by the number of days you will be away. You now have a daily budget for your trip. 

If you do not spend all of your holiday budget in one day, then carry it over to the next. However, try not to exceed your budget on any given day as it can be hard to make up the losses. You may want to also have a separate budget for buying gifts and souvenirs that runs for the whole trip. 

Budget for Time

Arrange your personal finances around your times. For example, you may be spending one day on a flight which will cost you far less than a day in a city. For every day like this, carry your daily budget over to the next.

If you find yourself spending more money than you planned, slow the trip down a little. Instead of going out every day, spend a few days by the pool. You may decide to cook in an apartment instead of going out for expensive meals or eat food from a street vendor. 

Pay Using Card

When paying by card in a shop or bar, always choose to pay in local currency. Paying in your own currency usually has a higher rate with conversions fees, so you will end up being charged more. When using a credit card, the rate will be set by Visa or Mastercard and will likely be much lower. 

Research Local Deals

Before you travel to a destination, do some research online for local deals and offers. These may be in the form of discount coupons for trips and sights, or for meals and food. 

Many restaurants have excellent tourist meals for visitors. You can save a lot of money, eating at very high-end restaurants in this way. Check local review sites for great places to eat then check their website to see what they offer. 

Create Your Own Tours

Arranged tours and guides are very useful. But they can also be very expensive. Save money by planning your own itinerary. 

If you are the adventuring type, get online, and utilize public transport. You may even hire a car or bicycle to go and see the sights. The joy of this is that you see a lot more of the destination and often find shops, food, and sights you would not have been exposed to before. 

Some city breaks even offer free walking tours. They are organized by knowledgeable guides who ask for a contribution at the end. You simply pay what you think they deserve and have worked for. 

Some destinations also offer combined travel and discount cards. They allow you access to transport and discount at major attractions and eateries. Family tickets can save you an awful lot of money in the long run. 

Coming Home

When you return, exchange any large amounts of leftover currency at ane exchange. For medium amounts, it may worth be worth the effort so it could be better to just spend them at the airport on your way home. 

If you are looking for more advice on holiday budgeting or general money management, then make a visit to our blog a regular stop. Whether it is personal or business finance advice, we can help you organized your money starting today!

6 Practical Tips to Help You Reduce Debt

The American economy has millions of people working paycheck to paycheck. As if it’s not enough, 80% of Americans are walking around with some type of debt to keep their head over water as a way to afford bills or pay back tuition looking for ways to reduce debt.

Debt also happens to those who have a poor understanding of finances or those who desire to meet a certain lifestyle. It can be exhausting to try to pay back what you owe when it is a lot. If you need tips on how to reduce debt and get back on track, keep reading. 

1. Learn Where You Stand

There are two types of debt a person who owes money has: problem debt and managed debt. When you are riddled with debt uncertain of how to pay it back, you are dealing with problem debt. This is because you are in a position where you take out more than what you can afford. 

The goal is to turn problem debt into managed debt so you can work to pay it back to be debt-free. This cannot happen if you do not know where you stand. The best way to be clear about your financial situation is to pull out a pen, paper, and your credit report. 

Your report will provide you a list of credit cards and loans you have, how much you owe, and whether or not you are current on the payments or not. If there happen to be discrepancies on your report, now is the time to correct it. 

2. Budget and Start a Debt Plan 

Before you contact lenders, you should create a debt management plan and create a budget to see what you can afford to pay. You may be able to pay more than you think each month if you can cut out certain expenses you do not need such as shopping. 

If you are able, you could also increase your budget by working more hours or finding another job. You can do this by yourself or you can work with a financial consultant to help add structure to your plans and guide you. 

3. Pay off Debt With the Avalanche or Snowball Method

You are in better control of your personal finances when you can order how, how much, and when you repay money you owe. There are two types of debts you may have. The first, known as revolving debt, comes from credit cards that have a monthly balance each month when you do not pay it back (in full). 

There is also installment debt that is a chunk of money you owe at once — although you pay back in installments. This is the case with mortgages, personal loans. Both can affect your credit score. It’s helpful to use the avalanche or snowball method when you are paying your debt back. 

Avalanche Method

With this method, you pay off debt from the highest interest to the lowest. Overall, you want to make at least the minimum payment, but add more money to accounts with higher interest. You continue this process to the end and doing this method helps you decrease the total amount of money you owe by reducing the interest. 

Snowball Method

With the snowball method, you are doing the opposite. You are paying back from smallest to largest. This method also works to lower the amount of debt you owe, but by eliminating debt which stops interest. 

4. Negotiate to Settle 

If you do have some money on the side or can get it, you may be able to clear the debt you owe quicker by settling on the balance with a lender. With this method, you are paying less than what you owe on the balance that the lender accepts. 

This amount may be as little as 20% or as much as 80% to 90% off your balance. The only way to figure out how much you can get off is through negotiation. Upon receiving your payment, they will show your account as paid. 

5.  Consolidate Debt

Another option to address debt is to consolidate it. A major benefit is that it can help with your credit scores. When you consolidate debt, you are rolling all your debt, including the interest rates, into one single payment and interest.

The attractive thing about debt consolidation is that you save more by having a reduction in interest so you can pay back the money you owe faster. This method is also ideal for those who find it hard to keep up with multiple payments. 

6.Do Not Add On to Debt

The last thing you want to do as you are working to repay debt is to add on to it. You should never attempt to get another loan or card to pay an existing debt. More often than not, this will make matters worse and it will be more difficult. 

This also means you need to change old habits that caused you to get in debt in the first place if you have problems spending. A good tip to avoid getting in more debt is to stop using credit cards when shopping and switch to cash when you know you cannot pay the balance back in full. Relearning to use cash rather than depending on credit cards can make a huge difference. 

Reduce Debt to Get Back on Track With Your Finances 

When you first get a credit card or loan, it can be an exciting feeling. It feels nice to be able to get something you want or pay a bill you previously could not afford to pay back. Every time you use money from a lender, you should always keep in mind the money is not yours, and it comes with interest.

When you do not pay what you owe, you will find it hard to get future approvals and notice a plunge in your credit score. There is a way to reduce debt and get rid of it when you acknowledge you have it and use the tips to get ahead of your finances. 

If you want to find more ways to keep your money in check, take a look at more blogs on the finances section on our website. 

Take Control of Your Money With These 5 Budgeting Sites and Apps

Talking about money is a major taboo in countries and cultures around the world, and the UK is no exception. While discussing finances with friends and family can be nerve-wracking, staying quiet about how we earn, spend, and save contributes to poor financial literacy. As a result, many of us never learned how to budget when we were young. Once you start earning a real paycheque, though, learning how to manage personal finances is crucial. Thankfully, budgeting sites and apps can help even the most novice beginners get a handle on their spending habits.

Here are five of the most helpful free and paid money management sites you should go to for budgeting tips and UK banking advice.

1. Yolt

Yolt is one of the best-known budgeting apps in the UK. It’s an open banking platform that lets you see all your linked accounts on one dashboard and track your spending from each of these accounts. You can also use the app to set budgeting and savings goals, transfer money securely to friends, and track your finances based on your payday instead of a calendar month.

The most unique part of Yolt is its stealth mode, a feature that camouflages your real balances and account information from prying eyes. Activating stealth mode will alter your standard currency and randomise other info while still allowing you to show what the app’s interface looks like.

The downside of this app is that you can’t use it on the web, only on a mobile device. There’s also a delay before transactions register in your account, meaning you can’t quite view things in real-time.

2. Money Dashboard Neon

The original Money Dashboard was a pioneer in the world of budgeting sites, but they’ve since scrapped the old interface and come out with a brand new app—Money Dashboard Neon.

Like other budgeting apps, Neon lets you connect your bank accounts to track them all in one place. It also allows you to break your spending into different categories and build a custom budget. Users can even sync their pay cycles for more accurate budgeting and schedule automatic payments through the app.

The downside of Money Dashboard is that to keep their app free of charge, they sell user data to third parties. Even though they anonymise the data and promise not to release your identity, this could be a deal-breaker for more security-conscious folk.

3. Moneyhub

The Moneyhub personal finance app is a bit different than the others on this list because it requires a paid subscription. The organisation’s reasoning, though, is that they’ll never sell your information to third-party buyers—something that’s very important when we’re looking at banking. The subscription won’t set you back much, just 99p per month or £9.99 per year, and the security is well worth the cost.

Moneyhub’s other standout features include an overview of all your financial accounts, detailed analyses of your spending, and the ability to set spending goals for yourself. You can also use the “nudge” tool to avoid missing a payment and get notified of ways to save.

What sets Moneyhub apart from the rest is the “forecast” feature. With this tool, you can add in a theoretical change to your budget (such as getting your car repaired or going on holiday) and see how it will impact your future finances. This empowers you to spend wisely and never be caught off guard.

4. Cleo

Have you ever wished that your bank accounts came with a financial advisor who would tell you exactly when you can and can’t afford something? With Cleo, the AI budgeting app, your wish can come true.

Cleo uses a healthy dose of sass and millennial humour to give it to you straight. If you’re trying to decide whether going out for a pint is a good idea, ask Cleo. She’ll analyse your current account balances and upcoming expenses to tell you “absolutely not” or “yes, but then you can only spend £15/day for the rest of the week.”

If even that isn’t enough to keep you from opening your wallet, you can always ask Cleo to roast you. She’ll come back with a flurry of memes and drag you for your financial choices (or begrudgingly admit when you’ve done a good job).

5. Emma

Emma may not be a budget planning app, per se, but it does make saving and sticking to your budget a lot simpler. Emma is, as the founders say, a “fitness tracker” of sorts that watches your transactions instead of your heart rate.

This app links directly to your bank accounts, investments, and credit cards to provide a real-time view of your entire financial state. The main feed on the home screen includes easy-to-understand summaries of your account totals and upcoming reminders. Deeper inside you can find detailed analytics, information about all of your linked accounts, and a money-saving tool that helps you find better deals on recurring bills.

Emma is unique because it applies the concept of gamification to your money. The app prompts you to complete “quests” that will help you understand how to use all of its features to the fullest. If you need more robust features than the free version provides, you can upgrade to a “Pro” account at any time.

Give These Budgeting Sites a Try and Take Control of Your Finances

Curbing your extra spending and understanding where your money goes doesn’t have to be painful. These budgeting sites make money easier to understand and—dare we say—can even make budgeting fun. If you’ve ever had questions about how best to direct your dollars or just want to see your finances displayed in an intuitive format, give one of them a try today.

The way you budget and spend your money is important, but where and how you save it has just as much of an impact. Take a look at this article for help deciding whether a commercial or investment bank is more in line with your financial goals.

Investing in the Good: The Impressive Rise of Impact Investing

Societal issues continue to get the media’s attention as many people take the fight a notch higher for a better society. But it’s all for a good cause because society starts to see good changes taking place. 

As usual, investors want to be part of the change. They’re now focusing their efforts on opportunities geared towards supporting social goals. This is where social impact investing comes in. 

Business is no longer all about making financial gains. It now involves environmental and social impact with its actions. Yes, investing is growing financial returns but for more noble causes such as the betterment of society.

Read this article and understand everything you need to know about global network impact investing and why it’s growing so fast. Let’s get started.

Understanding Social Impact Investing

If you’re new to this concept, it can be quite complex. Any information on the subject only gives rise to more questions. You can blame this on insufficient data available on the subject matter. There is not much information concerning impact investing and its profitability to either the investor or society.

But then, what exactly is impact investing?

Impact investing simply means unleashing the power of capital for everyone’s good. The main goal of this kind of investment is to generate positive social and environmental impact as well as make some financial returns.

Don’t get it confused with charity donations and social foundations. While both are geared towards helping society, impact investing is more of a win-win situation.

Impact investment focuses on helping society make some capital through your business. The capital would then address some challenges in society. Both the investor and society benefit in equal measures.

The funds usually go to noble causes such as renewable energy, environmental conservation, sustainable agriculture, and accessibility of basic services like education, housing, and healthcare. Anything deemed helpful to the environment and society calls for impact investing.

The Growth of Impact

The idea of investing with intentions beyond financial returns isn’t a new concept. There are many faith-based organizations working in accordance with their values of a better society. Catholic and Islamic organizations started this kind of investing a long time ago, and it looks like it’s not going anywhere.

The only thing that makes this intentional investing look like a new concept is that it has been known for a very long time as corporate social responsibility, sustainable investing, or socially responsible investing.

Companies have measured their performance not only on financial lines but also on how they perform along the lines of social, environmental, and corporate impact. The performance is more focused on these dimensions and how the company aligns with its values and social goals.

The type of investing is often referred to as a ‘double bottom line.’ The organization focuses on financial goals as well as its environmental and social impact. All these are aligned with their sustainable development goals.

A Growing Focus for Investors

While this kind of investing is still at its infancy stages, many global investors are continuously getting involved. Companies are coming up with their own impacting investing funds. It seems like something very lucrative in the business world as well as a noble course in society.

The Global Impact Investors Network (GIIN) estimates up to $228 billion in assets associated with impact investing firms. The figures show that this sector of the economy has been seeing tremendous growth over the past years.

Impact Investment Returns

As usual, no one wants to buy a dying horse. So, is impact investing really profitable? This is a question that many financial consultants have had to deal with many times. Of course, any serious investor will ask this question before making any kind of investment regardless of how noble it looks.

Some business people have subscribed to a common misconception that any double-edged business is doomed to fail. By this, they mean that any business that focuses on social impact and financial return will yield low returns.

Some researchers have strongly disputed this belief. They have proven that anything that is good for the environment and society is good for business. Others have proven the existence of a good relationship between investing in social, environmental, and governance with corporate financial performance.

There is a lot of evidence proving that impact investing is profitable to both the society and the organization.

Impact Investing Challenges

Like any other business, impact investing has its own share of challenges. It’s crucial to understand the challenges that come with any kind of investing and prepare for the risks involved.

This kind of business is also subject to the rules of the marketplace. The first challenge with impact is the difficulty in finding companies that meet the stringent requirement and still stick to the market rate of return.

Many businesses fail to meet all these two goals. The few that manage have to go extra miles to use additional resources and deal with great risks. You should trust your financial advisor to give you a better explanation of the challenges and the risks associated with social impact investing.

The Growth If Yet to Come

From the look of things, impact investing will continue to grow, and in the years to come, it will be the trend in the business world. The kind of investment has gained traction in the eyes of investors, and that’s all it needs to see success.

However, the future of this kind of business depends on the understanding that people will have on it. Everyone must learn to differentiate it from the philanthropic way of charity giving. You must understand that charity is no longer the only way to make a difference in society.

Now you have some knowledge of impact investment even though the concept is still complicated. Do you want to learn more about issues regarding investment, running a business, and managing your finances? Feel free to view our website for more educational blogs like this one. 

5 Key Differences: Commercial Bank vs. Investment Bank

Are you looking into what type of bank will be perfect for you? Deciding between a commercial bank vs. investment bank can be a complicated question. 

Luckily, we’re here to help. Keep reading, and we will discuss the five key differences between commercial banks and investment banks. 

1) Services

First, its important to consider the services the two provide. They offer different things. 

If you’re looking to underwrite new debt and equity securities, selling securities, pilot mergers and acquisitions, reorganizations, and or broker trades, then an investment bank is for you

On the other hand, if you’re in the market for individual loans, small business loans, checking and savings accounts, and or certificates of deposit, then you’re looking for a commercial bank. Most people are probably most familiar with commercial banking for their checking and savings accounts. 

Have you figured out precisely what services you are looking for? Large scale or small scale? 

Great, now that we’ve got that covered, let’s look at what kind of expenses and fees we are looking at. 

2) Expenses and Fees

While the dollar amount isn’t a distinguishing factor, it does show some differences. The fees are how the banks make their income. 

Investment banks typically deal with more significant dollar amounts due to having bigger corporations as clientele and higher monetary amounts in investments. Commercial banks handle basic financial transactions, which can get higher in monetary amounts, but usually equally a lesser amount of money. 

Investment banking comes with a set of fees due to the level of risk involved. The fees differ from firm to firm, but some of the potential fees could include:

  • Retainer fees
  • Upfront fees
  • Expense reimbursement
  • Success fees 
  • Minimum fees
  • Engagement fees

So what does this all cost? A monthly retainer typically doesn’t go lower than $5,000 a month. The retainer is what secures the investment bank and covers their cost as well as the risk they are taking on. 

Commercial banks also have their own sets of fees. They typically range much lower than that, though. 

Commercial bank fees vary based on account fees, safe-deposit box fees, and late fees. Some examples of potential account fees could be:

  • Monthly maintenance charges
  • Minimum balance fees
  • Overdraft fees
  • Non-sufficient funds charges

You’ll also run into more fees when it comes to loans, but it depends on the different kinds you’re considering. 

Now that we’ve got that covered, who exactly uses which type of bank?

3) Types of Clientele

Are you looking at banking options for an institution or for yourself? 

Well, big investment banking clientele can vary depending on the scope of need or based on the client. Some examples of big investment banking clientele are:

  • Corporations
  • Pension funds
  • Other financial institutions
  • Governments
  • Hedge funds

Large investment banks can also serve as financial advisors or brokers for institutions or companies. 

An investment bank could also offer retail operations for smaller individual clients.

If you’re reading that and saying, “Nope, not me!” Then you could line up with the commercial bank clientele more so than the investment bank.

The clientele of commercial banks primarily comes from individuals using personal checking and savings accounts, or through personal loans. Basically, ordinary people who are looking for standard bank needs. 

Through loans and earning interest income from investments, commercial banks make their money to provide new business loans. 

You now know what services are offered, how much it could cost, and if you fit their clientele. Did you consider the regulations that come with commercial banking and investment banking?

Don’t worry. We’re covering that next. 

4) Regulations 

All banks have some set of regulations to follow

Government authorities like the Federal Reserve and the Federal Deposit Insurance Corporation regulate commercial banks.

Commercial banks are insured so they can maintain customer account protection. For example, some can cover up to $250,000 deposits. 

Investment banks aren’t regulated nearly as much as commercial banks. The Securities and Exchange Commission governs them. This means their clients have less protection, but and gives the bank more operational independence. 

Because of the regulation difference, investment banks have higher risks associated with them. When you use an investment bank, you assume the risk, whereas commercial banks work in the interest of their clients. 

5) Banking Examples

You may be thinking great, now I know some difference, but can you help me out with some examples?

You got it! 

Have you heard of JPMorgan Chase, Goldman Sachs, Morgan Stanley, Credit Suisse, or Deutsche Bank? These are examples of large investment banks. 

Commercial banks in the United Kingdom could include HSBC, Royal Bank of Scotland, Lloyds TSB, Barclays, and Santander. 

Some banks could combine the functions of a commercial or investment bank. This could aid in the sales of an IPO or increased trading. 

This isn’t crucial to dive into, but worth noting. 

Some of the employees you can expect to run into in a commercial bank include tellers, sales associates, trust officers, loan officers, branch managers, and technical programmers. Whereas in investment banking, you’ll probably deal with an investment banker directly. 

So, Where Do You Go From Here?

Now when you ask the question commercial bank vs. investment bank, you have the ability to make an educated decision.  

From offering different services to helping different types of clientele, the kind of bank you choose will be a choice you make based on your unique set of needs at the time. Luckily, you have plenty of resources to turn to. 

If you’re interested in learning more about the finance and banking world head to CFI.co.

5 Huge Reasons to Trust Your Financial Advisors

1 in 10 adults in the UK are turning towards financial advisors to help manage their money and investments wisely. 

A financial advisor is a trained professional who can help you get the most out of your dollars. They help you know where to invest to get the best returns. And also how to manage your finances to meet your goals. 

Taking advantage of financial advisors can be a game-changer for many people. But often people put off asking for help and advice in this area. 

We’ve put together the top five reasons why you should work with a personal financial advisor. 

1. Training and Education in Finances 

The first reason that you should work with and listen to a financial advisor is that they likely have more knowledge about the subject than you do. 

A trusted financial advisor will often have certification beyond their college education. This certification will be earned by completing various educational requirements and then passing an exam covering the things they’ve learned. 

The economy, market trends, and predictions, and even the worth of a dollar are things that are continually changing.

Financial advising educational systems will give these professionals the training necessary to keep up with all the changes. Not only will they be able to keep up, but they’ll also be able to explain things to you in a way you can understand. 

And from there they can give you sounds, steady advice based on the information they’ve been given about your situation and the current economic standings. 

You can certainly take a DIY approach to managing your finances, but you may lack the knowledge and training to do it successfully. 

2. Time to Dedicate to Watching Markets

In order for investing to be successful and make you money, you have to buy the right stocks at low prices and then sell them at higher prices. This requires you to watch the market to know when things are low and high. 

Timing is everything in making money from investments. 

It takes consistent effort on a daily basis to be able to see trends throughout the market. The average person doesn’t have a lot of spare time lying around to watch for and interpret the trends they’re seeing. 

Instead, you could put your confidence in a financial advisor whose job it is to watch and understand the market trends. 

These professionals often spend a significant amount of time keeping themselves informed and in the loop of what’s going well and what’s not in investing. They’ll have a  better knowledge of things to buy and what to sell. 

You could half-heartedly make investing decisions in your spare time or you could leave those up to the professionals. 

3. Keep Complicated Situations Organized 

The traditional economy of a single income household has been changing rapidly over the last decade. Now many people rely on side hustles and secondary jobs to earn all of their income. 

While all of these sources are great for your bank account, they can make your financial situation a little more complicated. 

It can be hard to keep everything straight and have a good comprehensive view of your financial state. This requires you to keep detailed records of what’s going in, what’s going out, and any other changes to your account. 

The best financial advisor for you will be one who understands your situation. They’ll be able to keep things organized for you and give you advice on how to use your money the best way. 

They may also be able to help you make sure you meet tax or other legal requirements based on their better understanding of the laws in your area. 

4. Know How to Work Towards a Goal

Most people have some kind of financial goal they’re working towards, whether they realize it or not. It could be to save for a down payment on a house or pay off some unwanted debt. Or maybe it’s as simple as not wanting to feel stressed about their money situation. 

If you have a goal in mind to help your financial situation, it’s a great time to work with a financial advisor. 

A lot of times the outside perspective of someone unattached to your situation can make a big difference in making a solid plan. They can show you weak spots in your spending and other ways you could save. 

You can come with questions to ask a financial advisor for a professional opinion. This helps you to make the best choices for your family. 

Working with a financial advisor may also give you the motivation and determination to make better choices. Almost like a new level of accountability to keep you honest!

5. Less Worry During Life Changes

Our lives are always changing; we move, change jobs, add to our families, and acquire new assets. All of these things (and many more) change our financial situation. 

A financial advisor will be able to help you navigate through all of those major changes. 

They’ll be able to give you advice on how to adjust the way you spend, save, and invest in order to best fit your new needs. They can help you amok he necessary changes to continue on your way to more financial freedom. 

It can be very stressful to have to deal with change in your life. There are so many unknowns regarding how things will actually look in the future. 

Eliminating as much stress as possible will help the transition be much smoother; this can be done by working with a financial advisor. 

Following Your Financial Advisors Advice 

Speaking with financial advisors and getting their thoughts and advice is the first step to greater financial success. 

But the most important part of that success comes when you act on the advice given. Taking action on the investments and opportunities presented will give you the best results. 

If you want to learn more about financial advisors, good investment practices, or other wealth management tips, check out our blog for great advice! 

Follow the Money: What Do Investment Banks Do?

There are several different types of banks and institutions out there. By knowing what these banks do and how they differ, you’ll be able to improve your financial literacy and make better investing decisions. 

So, what’s an investment bank? And what do investment banks do?

An investment bank essentially acts as an intermediary institution that performs a variety of services. The majority of investment banks specialize in complex and big financial transactions. These kinds of banks help businesses make financial decisions and raise the capital they need. 

But there’s a lot more to it than just that. Are you interested in learning more? If so, then continue reading and we’ll walk you through everything you need to know!

How Do Investment Bank Works?

There are two main divisions of investment banks worth knowing about. The first is the advisory division, which is paid a fee for their work. There is also the trading division, which realizes losses or profits based on their performance in the market.

A person who works in an investment bank might have a career as a salesperson, trader, or financial advisor. While a career at an investment bank could be lucrative, it typically also involves a lot of stress and long working hours. 

Investment banks are best known for their financial intermediary roles. This means that they help businesses issue new shares of stock in an initial public offering (IPO). They also assist businesses to obtain debt financing by attracting investors for corporate bonds. 

The role of the investment bank starts with counseling before the underwriting process even starts. It then continues after the securities are distributed as they continue to offer advice. 

Investment banks also look at the accuracy of the corporation’s financial statements and they write papers that explain the offering to investors. The clientele of investment banks tends to consist of:

  • hedge funds
  • governments
  • corporations
  • other banks
  • pension funds

Many investment banks tend to use their size to their advantage. The more well-connected an investment bank is, the more likely it’s going to profit. It does this because it’s better able to match sellers and buyers. 

Many large investment banks have customers all over the world. 

What Do Investment Banks Do?

Investment banks perform a variety of functions. Often, they will act as the financial advisor to powerful institutional investors. An investment bank is supposed to be a trusted partner that provides strategic and useful advice on all kinds of financial matters. 

They’re able to do this by combining their ability to evaluate and spot investment challenges and opportunities along with understanding the desires of their customers.  

Investment banks also deal with mergers and acquisitions. During this process, the job of the investment bank is to determine the value of a possible acquisition and to help the parties come to a fair price. The bank will also help with executing and structuring the acquisition so that they can ensure that the deal goes as well as possible. 

Research is another important service that investment banks deal in. The research divisions of these institutions review companies and then write documents about their prospects. They will usually include “buy,” “sell,” and “hold” ratings. 

Although the research won’t bring in revenue on its own, the information that they come up with is used to help traders and sales. Investment bankers also get publicity for their partners and clients.

The research is also going to act as investment guidance to outside customers. This will hopefully get the clients to take the advice and execute a trade via the trading desk of a bank, which will then lead to increased revenue for the bank.

The research division is what powers an investment bank’s ability to conduct quantitative analysis, credit research, macroeconomic research, and fixed income research. All of this will then be used both externally and internally at the bank.  

Underwriting Deals

Investment banks will usually underwrite deals while they’re also arranging capital markets financing for their customers. This means that they manage the risk that comes with the process of purchasing the shares of stock from the issuers and selling them to institutional buyers or the public. 

Investment banks purchase shares at one price and then add a markup to the sale price. This brings them a profit that makes up for the risk that they’re taking on. This is also known as the underwriting spread

There will usually be a head investment banker who works with a group of investment bankers. This group is referred to as a syndicate and they all work together to underwrite an issue. This helps to spread the risk out among everyone. 

An underwriter will sometimes just play the part of a go-between for marketing deals. They help to market the stock but don’t take on the risk that comes with underwriting. When this happens, the investment bankers will be able to sell shares and get paid on the basis of commission. 

The Importance of Knowing About Investment Banks

Hopefully, after reading the above article, you now have an answer to the question, “what do investment banks do?” As we can see, investment banks tend to work with large institutions and perform complex deals that can involve enormous amounts of money.

And even though many people might not directly interact with an investment bank, the actions that these banks take can affect a variety of people, especially those who invest. And by knowing how these banks operate, you’ll be better to make more informed and confident financial and investing decisions.

Are you wondering if now’s a good time to invest? If so, then make sure to check out our other articles for more!

7 Factors to Consider Before Choosing an Investment Banker

The total revenue for 12 of the largest investment banks was $147.5 billion in 2019. While the revenue was a 4% decrease from the previous years, investment banking remains a crucial aspect of the economy. Consequently, there has been a surge in the number of investment bankers.

Selecting an experienced and qualified investment banker can be daunting. You need to be critical in your vetting as the choice of investment banker will impact your transaction experience. A professional investment banker will give you the best advice, negotiate with the utmost prowess, and ensure that you get the best deal.  

Are you looking for assistance in managing your investments? Here are factors you might want to consider when choosing an investment banker.

1. Reputation 

The reputation of a bank is an essential consideration. However, the character of the people transacting on behalf of the bank is more crucial. It would be best if you vetted an investment banker as an individual.

Check their past deals. Do they have a track record of success? The main areas to consider are the banker’s industry, the size of the deals closed, and the transactions involved.

Your chosen investment banker should be someone whose reputation is commendable. You can research and vet more to know the type of person who will be handling your investments. 

2. Chemistry and Trust 

You don’t want to take chances collaborating with an investment banker you can’t trust. You will be entrusting all your financial transactions based on advice from this specific investment banker in the long-term. The process will undoubtedly be time consuming and intimate.

As such, ensuring that you develop synergies with the investment banker is necessary. Chemistry refers to the inherent feeling of being comfortable listening to your banker’s advice. You’ll also need to ask relevant and somewhat delicate financial questions over time. 

It would help to focus on the chemistry when shopping around for an investment banker. If the chemistry isn’t there, you might end up dealing with a more stressful situation. Trust, on the other hand, is non- negotiable. 

You can’t afford to deal with someone you can’t trust. Trust must be at the centre of any relationship with an investment banker before committing to a long term engagement. This is especially crucial considering the value of your investment. 

3. Get a Relational Investment Banker 

In investment banking, creating rapport with clients is essential. You need to prioritize a banker with essential relationship skills. While the skill is intangible, it’s one of the most critical for investment bankers.  

The stakes in investment banking are quite high. An investment banker with the right social skills and attitude will address extreme conditions and individuals. Nothing is more fulfilling than having an investment manager who understands you!

You’ll be communicating with bankers often when running a transaction. It would help to identify bankers with the right communication skills. Within the first encounter, you can gather clues that will determine whether the banker has the right set of communication and relational skills.

4. Valuation and Fees

Cost is always a factor when choosing a reliable investment banker. You want to understand the cost implications before committing fully to such services. The banker should be able to present an accurate cost of services.

While you might be keen to attract someone who charges the lowest fee, it would help focus on the ROI. Your goal should be to work with someone who has the highest qualifications.  It would help balance the need for a pocket-friendly deal with a highly reliable banker to ensure value.  

It would also be essential to ensure that you understand all the hidden fees and any other charges before hiring an investment banker.

 When it comes to valuation, a good banker should keep up with the trends in your specific industry. This helps in interpreting the market activities and their impact on the value of your valuation. Ensure that you understand the range of valuation before committing to hiring.  

5. Availability of Resources 

A reliable bank should have adequate resources for your deal. If a firm has large teams, they are unlimited on the financial transactions it can handle. While this might be a positive aspect of the bank’s view, it might not favour you.

It is best to work with an investment manager who will guarantee you a personal experience. Confirm if they have the right resources. You can check out the different types of investment banking services and the available resources to know if they resonate with your business needs.

6. Transaction Experience

One of the essential factors you might need to consider when selecting an investment banker relates to experience. Can they get the deal done? You don’t want to deal with a novice who might take longer to deliver. 

You also want to rest easy, knowing that your investment banker has the experience necessary to deliver. A banker who has been in the industry long enough understands the dynamics in the sector. The easiest way to validate an their experience is to consider the number of past transactions.

The more the number of transactions the banker has, the more the experience they bring on the table. It would help to consider the level of experience the they have before proceeding to commit. 

7. References and Reviews 

Every investment banker worth their salt has a battalion of loyal clients. Reviews play an important role in determining any business’s repute. Before you decide to hire an M&A specialist, consider the testimonials that back up their exceptional services.

Most past customers provide honest feedback on their engagement with respective investment bankers. You can utilize such information to determine the most suitable banker to handle your case. It would also help consider negative reviews as a red flag when dealing with investment banking service providers for the first time.   

The Right Investment Banker Has a Significant Impact on Your Wealth  

Transactions are often laden with challenges. You’ll meet buyers who are more familiar with the market than you, leading to disagreements. With an experienced investment banker, you can rest easy knowing that the process will be seamless. 

You need to familiarize yourself with the banker’s skills and experience. Thorough vetting will enable you to settle for the best talent around. 

Contact us today for compelling articles on financing.