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.

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.

Is Now a Good Time to Invest? Buying Stock During a Pandemic

The global pandemic has lead to a lot of predictable anxiety, lockouts, and business closures in the last few weeks and months. It has raised many legitimate questions about global finances, with one very important one weighing on investors. “Is now a good time to invest?”

What are the more robust markets to invest in right now? Can anybody, even a freelancer, do well in the market? And what is the best approach to take to keep your money safe?

Join us today as we break down some of our favourite tips.

Don’t Be Reckless

It can be easy, in the midst of everything the world is going through, to feel like the world is your oyster. You can expect to see panicked sales going on in waves over the next few months. This may seem like a tempting opportunity to wade in and start buying up everything you can get your hands on.

Keep in mind, however, that discretion is never a bad idea. There will still be plenty of bad deals floating around, and COVID-19 will run its course. You could find yourself dealing with the repercussions of a bad investment sooner than you might expect, so be careful.

Don’t Invest Unless You Can Maintain It for Three Years, Minimum

Considering buying stocks in response to falling prices? Consider the stability of the investments you’re sizing up. To be responsible, you have to be able to hold your investments for a minimum of three years so they have the chance to recover.

This goes for investments at any time of the year but is especially true during quarantine times.

You may want to sell. You could have any number of reasons for this.

Maybe you’re scared by all the instability. Maybe your broker recommends it. Whatever your reasoning, you should not invest during a stock market crash if you’re not ready to hold your investments for at least three years.

Stocks have a high potential return rate, but we only see those returns when we hold down, consistently, during episodes of volatility. Three years is the recommended amount of time necessary to overcome short-term market losses.

You also cannot, under any circumstances, invest money you may need in an emergency into these stocks. If you invest emergency funds and then, later on, have an emergency, you’ll need to sell to get access to that money.

Don’t Spend It All on the Markets

Cash tends to retain its value, even during a stock market crash. What this means for you, as an investor, is an opportunity to keep a portion of your investing power liquid and ready in case the market drops.

You’ll be more ready to take advantage of these dips in activity if your funds aren’t already all wrapped up in equity. Compared to other investors, strapped for cash and weighing up their options, you’ll have a distinct advantage.

Regret: It’s to Be Expected

“The best-laid plans of mice and men often go awry.”

Nobody ever gets into the stock market intending to lose money. That said, losing money, at least in the short term, is an inevitability. It’s always easier to plan when the markets are behaving as they should be.

It’s no secret that investors get nervous when the stock market is erratic. They feel regret over not getting in earlier. They feel regret at not selling sooner.

You will probably feel the same way at some point in the future. It’s inevitable, and you will almost always be left something you wish had gone differently. The worst thing you could do is sell scared.

Expert investors with years of experience don’t have perfect days. If you’re trying to take advantage of the market during COVID-19, it’s important to remember not everything will go perfectly.

Stocks will fall, sometimes repeatedly. They have done so throughout history, and have always recovered. If you are bold enough to get into the stock market during a global pandemic and impending recession, you need to be bold enough to weather the storm.

A Note on What to Invest in Now

Investing in stocks and shares is about taking a smart approach to your investments. But it’s also about investing in stocks and shares you know will make a return. With all of that said, which sectors will be most likely to pull ahead during the COVID-19 outbreak?

Healthcare and Biotechnology

The biotech and healthcare fields are expected to remain entrenched during the outbreak due to their role in treating it. Look at Quidel Corporation (QDEL) and Masimo Corporation (MASI) for mid-to-large caps. 

Teleconference

Because of its role in quarantines, teleconferencing software is also attracting purchases. It’s not a field that gets as much attention in a regular year, however, so expect some inconsistencies by way of growing pains. Citrix Systems, Inc. (CTXS) and Teledoc Health, Inc. (TDOC) have both shown promise.

Safe Shelters

The safe-haven has had its place throughout dozens of national and international disasters. They’ve seen consistent growth throughout COVID-19, with climbing dividends staving off lower prices. Campbell Soup Company (CPB) recently traded near a 52-week high, while American Water Works Company, Inc. (AWK) has come in with some great returns, as well.

Is Now a Good Time to Invest?

The world is in an interesting place, right now. One of the biggest global pandemics in recent history has sent literally everybody inside, from the man on the street to whole businesses. And, with stores, restaurants, and even some non-essential public utilities all shutting down, it can be easy to think this is a bad time to invest.

The truth is quite the opposite, though. With the market shifting to products and services relevant to the virus, we’re seeing new opportunities for investors.

It’s all about changing your perspective and learning to roll with the punches, and this is the perfect environment to do exactly that in. Some of the best long term investments come out of trying times. And COVID-19 is certainly trying.

Is now a good time to invest? It’s as good a time as it’s ever been, which means “absolutely,” provided you’re ready to put in the time and effort and invest wisely.

Looking for more choice investment insights? Check out some of our other expert blog content, today!

Is a SIPP (Self-Invested Personal Pension) a Good Idea for Freelancers

A quarter of British adults have nothing in savings. Meanwhile, one in 10 Brits admits they tend to spend more than they earn. As a freelancer, you can’t get caught without a good nest egg awaiting you during retirement. By setting up a self-invested personal pension (SIPP), you can prepare yourself for the year to come. A SIPP will help you save for retirement without worry you’ll spend your savings. 

What is a SIPP pension exactly, and how does it work?

Keep reading to find out everything you need to know about SIPP investments as a freelancer!

What is a SIPP?

First, what exactly is a self-invested personal pension?

A SIPP is a pension that holds all of your investments until you retire and begin drawing a retirement income. This form of personal pension works similarly to a standard personal pension. The main difference, however, is that a SIPP offers more flexibility with the investments you choose.

Once you have your SIPP set up, you can add regular contributions to your nest egg. You can also make ad hoc payments into your self-employment pension. Then, your pension provider will claim tax relief and add it to your savings.

How Does It Work?

How does a SIPP work and help you save for retirement?

With a standard personal pension, all of your investments are managed for you. They’re controlled within the pooled fund you selected. With SIPPS, however, you have the freedom to select and manage your own investments instead. 

You can also pay an experienced, authorised investment manager to make the decisions for you. 

SIPPs are best for people who want to manage their own funds. By giving you control, your self-invested personal pension also allows you to switch investments as you’d like. That way, you have the peace of mind that you’re making investments with your own best interests in mind. 

Why Is It Important as a Freelancer?

The majority of Brits between the ages of 22 and 29 have no more than £1,000 tucked away in savings. If your self-employed, it’s up to you to start a pension on your own. 

Unfortunately, many self-employed people struggle to make ends meet as they grow older. By planning for SIPP investments now, you can prepare yourself for any rocky roads ahead.

There are a few benefits to choosing a SIPP, including:

  • You can receive pension tax relief from the government
  • A strong pension plan will give you low-cost access to professional investment managers
  • The right investment manager can help you invest your money in a range of assets
  • Choosing the right assets can help you manage risk in a sensible way
  • If you die before you turn 75, your pension will pass on to your beneficiaries as a lump sum
  • New pension freedom rules allow you to decide what to do with your pension savings when you reach retirement

As a freelancer, having the freedom to choose what you do with your self-employed pension is essential. Many full-time employees are already paying into a pension. In fact, employers are now obligated to automatically enrol employees into a workplace pensions scheme. 

Other Options

If you’re currently self-employed and want to set up a private pension, start by finding any old workplace and personal pensions established in the past. Then, combine them into your new pension. Completing this process will make your new self-employment pension easier to manage in the long-run.

Working with a financial advisor can make this process easier, too. They can help move your pensions over into their system. Then, they’ll combine and transfer your pensions into your new SIPP pension plan. 

Otherwise, might need to contact your previous pension providers to get your pension balances on your own. 

In addition to a SIPP pension plan, you might decide on other options, including a personal pension or stakeholder pension. Self-employed individuals can also utilise the government scheme National Employment Savings Trust (NEST), too. However, there’s no “best” pension for self-employed workers.

It really depends on your own specific circumstances.

Ideally, try to find a provider who lets you make contributions when you want. As someone who is self-employed, your income might not end up as predictable as you’d like. Having control over the details of your self-employed pension can make it easier to manage. 

Investments

Now that you know a little more about how SIPP investments work, let’s review the assets you can choose from. A few include:

  • Unit trusts
  • Some National Savings and Investment productions
  • Commercial property (shops, offices, factories)
  • Investment trusts
  • Government securities
  • Individual stocks and shares (quotes on the recognised UK or overseas stock exchange)
  • Insurance company funds
  • Traded endowment policies
  • Deposit accounts with banks and building societies 

However, this is only a shortlist. Speaking with an expert can help you explore your options. There are also different SIPP providers who have different investment options available for you to choose from. 

You can’t hold residential property directly within a SIPP with tax advantages that usually accompany pension investments.

However, you can hold residential property in a SIPP through certain types of collection investments. For example, a real estate investment trust would allow you to include the property in a SIPP without you losing tax advantages.

These investments are often subject to restrictions. It’s also important to note that not all SIPP providers will accept this type of investment. 

In addition to your self-invested personal pension, make sure to take the time to develop an overall investment strategy. Planning now will help you in the future.

You can access and use your SIPP more flexibly now. According to new rules, you can now access the money in your SIPP at the age of 55. 

Take a SIPP: Understanding Your Self-Invested Personal Pension as a Freelancer

Prepare for the future and make the most of your money. By understanding the importance of creating a self-invested personal pension, you can save away money as a freelancer. Then, you’ll have what you need to prepare for the day you retire!

Searching for more helpful investment tips? Explore our latest Investment Management guides today.

Nigerian bank DLM on the move delivers at all levels – with exciting plans in the pipeline

DLM Capital Group – a developmental investment bank that supports economic and social infrastructure projects with the aim of driving GDP growth and improving lives. 

Founding chairman and group CEO of investment firm DLM Capital Group , Sonnie Ayere
Founding chairman and group CEO of investment firm DLM Capital Group, Sonnie Ayere

DLM Advisory Partners (DLMAP), formerly Dunn Loren Merrifield Advisory Partners, is the advisory and capital-raising arm of DLM Capital group. The principal services provided by DLMAP include financial advisory, debt capital-raising, equity capital raising, mergers and acquisitions, and company set-up advisory.

DLMAP has played a leading role in structured finance and securitisation within Nigeria. “We have acted as sole arranger to more than 80 percent of structured finance transactions in Nigeria, and 100 percent of all securitisation transactions in the market,” says CEO Sonnie Ayere.

Most Innovative Transaction of 2019

In 2019, DLM executed the first Bus Rapid Transit (BRT) securitisation in Nigeria, working with the sponsor, Primero Transport Services Limited (PTSL). The system caters to residents of the country’s most densely populated city, Lagos. DLM raised ₦16.50bn ($45.8m) through the securitisation of the company’s BRT tickets receivables. The sponsor is licensed to operate the longest BRT route in West Africa, 35.3km, with its 434-bus fleet.

DLM Capital Group

A feasibility study conducted put the daily passenger carriage at about 226,300 passengers per day. Due to working capital pressures, the company was only able to serve an average of 135,000 daily passengers before the securitisation transaction in 2019.

The ₦16.5bn 17 percent Series 1 Fixed Rate Bonds issued were primarily used to refinance all pre-existing commercial banking loan facilities on the books of the sponsor. The transaction provided the company with savings in interest, shaving the cost of funds from 27 percent per annum to 17 percent. At the same time, it extended the tenor of the company’s debt from three years to seven.

With this transaction, DLM was able to provide the company with up to 10 percent savings in interest, reducing the cash required to service debt and improving the company’s working capital. DLM also advised on the restructuring of the company’s balance sheet by moving the operating assets into a new vehicle and eliminated the strain of depreciation charges.

Focus for 2020

DLM is in discussions with industry stakeholders and umbrella bodies to establish proprietary funding conduits across key sectors of the Nigerian economy. It intends to include microfinance, agriculture, education, health care and a continuation of other funding programmes for the mortgage, real estate and transportation sectors.

Working with a DFI partner, the company recently concluded the design of an aggregation vehicle aimed at providing local currency, wholesale funding solutions to micro-lenders in Nigeria by way of loan book securitisation.

A similar platform to provide financing to primary users of agriculture commodities is currently being developed.

What’s the secret to trading on the financial markets?

Giles Coghlan, chief currency analyst at HYCM

Giles Coghlan of HYCM
Giles Coghlan of HYCM

There are countless books claiming to elucidate exactingly how to invest over the long-term. However, ask any seasoned trader what the secret is to an effective investment strategy and you’ll quickly find there is no one tactic or panacea for consistent growth.

Instead, what most traders rely on is an informed and reactive understanding of both current affairs and unfolding market trends to help inform their investment decisions. By letting this understanding dynamically inform one’s portfolio, they are able to confidently react to sudden market shocks.

Investors must therefore have one eye on the present and one eye on the future, and understand how different social, political, geographical and economic events could impact their portfolio. This understanding must be informed by an awareness of how past events have affected the prices of different assets. Thankfully, there are plenty of useful ways that investors can prep for the future.  

Markets are all about cause and effect

The fundamental operation of the financial market is one of cause and effect; one event or price movement will inevitably affect the prices of other assets. Whilst this is a simple enough concept, big political and social events often trigger a multiplicity of effects, which can in turn impact on one another.

For example, the recent outbreak of coronavirus is having a major impact on global supply chains; China’s productivity has been negatively affected, which has had a flow-on effect on major businesses that rely on China as part of its supply chain.

In terms of market volatility, there is a huge amount of historical evidence which shows how the coronavirus could impact asset prices. One central theme is likely to be the increase of value in ‘hard commodities’ — physical investments like gold, steel and oil. That is because these so-called safe haven assets are perceived as having global appeal and consistent demand, and therefore offer greater resilience in times of volatile trading conditions.

Never overlook the advantages of an informed strategy

I doubt you could find many long-term traders who have not woken up one morning to see that there has been a dip in the value of their investments as a result of an unforeseen geopolitical event. For those who find themselves in this situation, it can be easy to panic and make uninformed decisions. This is the entirely wrong approach to take.

By its very nature, finance is an unpredictable sphere of work, and unexpected shocks are par for the course. That’s why the strongest financial plans tend to include or account for the unforeseen. When prices dip or there is a sudden market shock, it has been for the most past accounted for and leaves little room for sudden trades that are informed by the heart, not the mind.

Remember to diversify (within limit)

Another way of managing market volatility is ensuring your portfolio is diverse, with investments spread across multiple markets. Doing so reduces your portfolio’s risk of suffering significant loses should one particular market or sector be adversely affected by an unexpected event. However, the key to diversification is not to cast your net too wide.

The broad points that need internalising here can be surmised very briefly: knowledge is power.

Mastering the complex nature of different financial markets is not simply about watching the fluctuating prices of assets. It’s also about understanding the historical performance of different markets, analysing previous trends and using all this as a guide to manage your investments during sudden political and economic shocks.

What’s more, any investment decision or trade needs to be part of a bigger strategy with goals, returns and risk exposure all clearly defined. Doing this ensures that investors and traders are in the position to stay on top of their financial portfolio.

High Risk Investment Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 67% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. For more information please refer to HYCM’s Risk Disclosure.

Giles Coghlan is Chief Currency Analyst at HYCM – an online provider of forex and Contracts for Difference (CFDs) trading services for both retail and institutional traders. HYCM is regulated by the internationally recognized financial regulator FCA. HYCM is backed by the Henyep Capital Markets Group established in 1977 with investments in property, financial services, charity, and education. The Group via its relevant subsidiaries have representations in Hong Kong, United Kingdom, Dubai, and Cyprus.

Types of Investment Banking Services and How They Can Help Your Business

Your business is going to disappear into the void if you try to expand. It’s going to vanish into the gaping maw of capitalism, shredded to microscopic pieces. The public won’t even blink.

Okay, so it won’t be that bad. But the higher on the totem pole your company tries to get, the more danger you put yourself in of entering total doom. What options can you pursue to prevent that?

You’ve come to the right place. We’re here to tell you all about the different types of investment banking services and how they can help your business! 

Are you ready? Then let’s jump right into it!

What Is An Investment Bank?

To keep it simple, investment banks are banks created for boosting the funds of organizations like corporations and divisions of the government. These banks will often be privately owned (like Citi Private Bank or Pictect) and will have whole teams of people working on a project at a time.

These banks will often serve as the go-between for your company and private investors you’re looking to get money from. Think of them like the cream holding the Oreo of your company and the investors together: they make all your negotiations and deals quicker and easier. 

The banks divide into three sections: the front (where all the direct service, advising and investing happens), the middle (the research/IT guys), and the back (HR, day-to-day organization, etc).  You will be dealing with the “front” most of the time, but it’s important to know the other parts in case you require their services.

Investment banks break down into three types: elite boutique, middle-market, and bulge bracket. Bulge bracket banks are the “big dogs” of the banking sphere: they handle operations all over the world, and they tend to lean toward investments in the billions. Middle-market is a smaller-scale version of bulge bracket: they work globally too, but opt for lower-end investments. 

Finally, elite boutique banks are the regional variants of the bulge bracket banks. They handle big-scale investments but focused on a specific area with a smaller staff. There are extra variants of boutique banks that keep the regional focus but handle more reasonably-sized investments.

So what can these banks do for you?

The Different Types Of Investment Banking Services

One of the major services investment banks will offer you is underwriting. Underwriting is an agreement where someone can take on some of the risks (financially speaking) of a company or policy. In exchange, they take a flat sum upfront.

In this case, the bank won’t need to find a third party to finance the agreement: they’ll do it themselves. Bankers at these companies will buy your stock and then attempt to market it off to other investors, or skip the buying step and be your very own salesmen.

This can also have the effect of increasing the chance that investors will get in on your business, as the bank taking stock shows them you have some credibility to your name.

Skipping the buying step is less common than you may think, however: the bankers get no flat sum if they don’t buy, meaning their income relies on how much of your stock they sell. So unless they want to go broke, they’ve got some motivation to fight like hell for your business. 

Another service investment banks will offer you is matching you up with investors. The process will entail you and the bank working together to find tiny groups of investors that you can privately sell your stock or securities to. If you’re not looking to go all in on public stock, this may be the option for you.

Public Stock And Other Investment Banking Services

Investment banks are tailor-made to help you with getting your IPO (initial public offering) off the ground. They can do everything from advising you on the right price to debut your public shares at to helping first-time business owners navigate the paperwork and legalese-filled world of the stock market.

If public shares aren’t your speed, or you’ve already gone down that route, investment banks can also advise you on any mergers or acquisitions your company is undertaking. This “division” of investment banking splits into two sections: the buyers and the sellers.

Both divisions will look at their respective companies’ finances and tell them if the merger is a good idea, in addition to creating a basic plan and price for both companies to go off of. They’ll even assist at discussions if you need them to, helping to keep the process smooth and civil.

These negotiations will also be determined via the “type” of bank you’re in: higher investment talks will need to go to bigger banks.

Before You Start Investment Banking

Despite all the services they offer, investment banks can be very costly, so it’s important to do your research before you hop on board. Try to pay attention to global or national events and how they could affect the market: recently, investment bankers have jumped ship on deals or stocks in China due to the Coronavirus.  

Another factor to consider is the power you are handing the bank over your company. This is more important if you take the route of investment bankers buying shares in your company. They will have your best financial interest in mind, but if you pride complete freedom and autonomy in running your business, it will be something you should think about first.

Taking Your Next Steps In The Banking World

Congrats! You are now equipped with the basic knowledge you need to test all the types of investment banking services and have an estimate as to whether it’s right for you!

If you have more questions about investment banking or more happening in the wide world of finance, check out some of the other posts on our blog!

So until next time, play it smart and keep a financial eye out: if you play your cards right in investment banks, you could be the next big business juggernaut.

Coronavirus: investors should avoid knee-jerk reactions

Coronavirus is the number one threat to financial markets currently – but most investors should avoid knee-jerk reactions, affirms the CEO of one of the world’s largest independent financial advisory organizations.

Nigel Green, deVere Group chief executive and founder, is speaking out as global stock markets are rattled on fears of the potentially deadly Sars-like virus triggering major sell-offs.

The death toll has now risen to 81 and almost 3,000 people have been confirmed as infected, with 44 cases having been detected outside China, where it originated.

On Monday, the composite European Stoxx 600 fell 1.7% at the open, London’s FTSE 100 dropped 1.6%, while Germany’s Dax was 1.7% lower.  The slump followed a similarly dramatic decline in Asia overnight. The Shanghai Composite fell 2.7%, the Hong Kong Hang Seng lost 1.1%, and Japan’s Nikkei dropped 2%.

Mr Green says: “The Coronavirus is the number one threat to financial markets currently as global investors are becoming jittery on the uncertainty.

“But whilst this health crisis will inevitably hit some sectors, such as travel and retail, most investors who have a properly diversified portfolio should avoid knee-jerk reactions.  History teaches us that most issues of this kind have a short-term impact on stock markets.”

He continues: “Most investors should monitor the situation with their financial adviser and sit tight at present. But if it is still escalating next week, with much higher casualty rates, a more defensive approach might be necessary. 

“However, the cost and effort of making such a switch means you do not do it lightly, and more evidence is needed that the virus does pose a medium to long term risk to China and the global economy.”

Mr Green goes on to say: “But that said, this should serve as a wake-up call to all investors to ensure their portfolio is well-diversified across asset classes, regions, sectors, even currencies. 

“This is the best way to mitigate risks and the best way to be well-placed to take advantage of the opportunities when they occur.”

The deVere CEO concludes: “Stock markets tend to bottom with the peak in new cases during a public health issue of this kind, before rebounding.

Coronavirus is the number one threat to financial markets currently – but most investors should avoid knee-jerk reactions, affirms the CEO of one of the world’s largest independent financial advisory organizations.

Nigel Green, deVere Group chief executive and founder, is speaking out as global stock markets are rattled on fears of the potentially deadly Sars-like virus triggering major sell-offs.

The death toll has now risen to 81 and almost 3,000 people have been confirmed as infected, with 44 cases having been detected outside China, where it originated.

On Monday, the composite European Stoxx 600 fell 1.7% at the open, London’s FTSE 100 dropped 1.6%, while Germany’s Dax was 1.7% lower.  The slump followed a similarly dramatic decline in Asia overnight. The Shanghai Composite fell 2.7%, the Hong Kong Hang Seng lost 1.1%, and Japan’s Nikkei dropped 2%.

Mr Green says: “The Coronavirus is the number one threat to financial markets currently as global investors are becoming jittery on the uncertainty.

“But whilst this health crisis will inevitably hit some sectors, such as travel and retail, most investors who have a properly diversified portfolio should avoid knee-jerk reactions.  History teaches us that most issues of this kind have a short-term impact on stock markets.”

He continues: “Most investors should monitor the situation with their financial adviser and sit tight at present. But if it is still escalating next week, with much higher casualty rates, a more defensive approach might be necessary. 

“However, the cost and effort of making such a switch means you do not do it lightly, and more evidence is needed that the virus does pose a medium to long term risk to China and the global economy.”

Mr Green goes on to say: “But that said, this should serve as a wake-up call to all investors to ensure their portfolio is well-diversified across asset classes, regions, sectors, even currencies. 

“This is the best way to mitigate risks and the best way to be well-placed to take advantage of the opportunities when they occur.”

The deVere CEO concludes: “Stock markets tend to bottom with the peak in new cases during a public health issue of this kind, before rebounding.

“This is a worrying and serious situation and investors must be vigilant. They should remain properly diversified and remain in the market.”

“This is a worrying and serious situation and investors must be vigilant. They should remain properly diversified and remain in the market.”

Stock Market 101: Investment Advice for Beginners

For most that do not invest in stocks, the idea of the stock market seems very risky and scary. For them, the risk appears to outweigh any potential upside. However, this is not the case!

Investment in stocks can seem intimidating, but it doesn’t have to be. This investment advice will help you start improving your investing skills today.

Stock Market 101: Investment Advice for Beginners

You may be wondering if investing is a good idea for you. Of course, it is! Every person needs to invest in order to grow their financial accounts.

Having your money tied up in traditional savings accounts alone will not do it. Not only will it provide it a low rate of return, but it probably will not even keep up with inflation.

Investment Platforms

Before we talk about the stock market in more detail, let’s talk about how you can purchase them. There are three main outlets in managing stock investments- online brokers, investment advisors, and robo-advisors.

While they are all different, one will be perfect for your personal situation and needs.

Online Brokers 

It is no surprise that many people turn to online brokers when looking to invest in the stock market. The most significant upside to online brokers is that you can handle everything entirely online. Also, you can invest in a wide variety of items.

However, online brokers are not always beginner-friendly. While they offer some investment advice, most online brokers are geared towards those with more experience and comfortable in managing their own investment portfolios.

Investment Advisors

Investment advisors are dedicated professionals that can give you personalized investment advice. These advisors work with people one-on-one and can give you direct investment advice based on your goals, timeline, and how much risk you want to take.

After discussing this with a potential investor, the investment advisor will create a diverse portfolio that is appropriate for their needs and wants. The portfolio is filled with a wide range of products.

For most beginners, it can be challenging to find an investment advisor to work with. Many advisors only work with those with an extensive portfolio or significant amount of money (starting around $250,000) available to invest.

Robo-Advisors

Robo-advisors are recent additions to the scene but have quickly become a popular way to invest in the stock market. Offering similar services as investment advisors, they do not require a high investment, making them within reach for all investors.

Just like traditional investment advisors, robo-advisors will evaluate your goals, needs, and tolerance to risk. They will create a personalized portfolio that will be filled with lower-cost products. This helps you save money as the fees will not be as high as other avenues.

Robo-advisors are available to investors, both new and established. No matter your income available for investing, a robo-advisor can create a portfolio for you!

Stocks

Stocks are a popular product to use when investing in the stock market. Usually, stocks highly outperform other investments and outpace inflation.

Many investors make stocks the primary investment in their portfolio. While they tend to diversify for lower risk tolerance, investors keep coming back to stocks for their high return.

So, how much of your portfolio should be stocks? For a conservative portfolio, a common rule is that the percentage of a portfolio that should be stocks is 120 minus your age. For example, if you are 40, 80% of your portfolio should be stocks. Then, when you turn 50, that number lowers to 70%.

Stocks to Invest In 

So what stocks should you invest in? As a new investor, you should focus on categories, not individual stocks. We will go over some of the standard and best stock categories to invest in as a beginning investor.

Value Stocks 

Value stocks trade at lower prices. These are usually companies that are recovering from some difficulty or had faced some legal issues. Because of this, their prices are lower than other stocks.

However, the benefit can be yours once the company recovers. Your investment in value stocks will likely outperform the stock market in general over the long term.

High Dividend Stocks 

High dividend stocks are just what their name suggests, a stock that pays out a higher dividend than the average. Since around half of the return on stocks comes from dividends, it just makes sense to invest in high dividend stocks.

These are also a great way to give a bit of protection to your portfolio. Having high dividend stocks can provide some level of protection during a downturn in the stock market.

Growth Stocks

Growth stocks are from those businesses that are growing faster than their competitors and other companies that are listed on the general stock market. Even though they traditionally do not pay dividends, the return comes from the rising stock price when help on to long-term.

Just a piece of investment advice on growth stocks: these are considered high risk. While the potential is strong for growth, they may also take significant hits when there is a downturn in the market. Just remember that these are a long-term return stock, and you should be OK.

Start Investing in Stocks 

Now that you know a little more about stocks and investing, you may wonder if you should get started. There are some steps you should take beforehand to ensure that you are ready!

First, you need to get a solid financial base. Some basics to follow includes having sufficient and stable income, an emergency fund that covers three to six months of expenses, and a track record of saving. This will help set you up for a solid beginning to your investment portfolio.

Second, you should further educate yourself about the different types of investments and products available in the stock market. Just remember to never invest in something you don’t understand. When purchasing a stock, you are actually investing in a specific business.

When investing in a business, you should educate yourself on that business and its industry as must as you possibly can.

Investment Advice

While all of this may seem overwhelming, there are many advisors and sites ready to help you with any investment advice that you need. Don’t let the fear of the stock market stop you from realizing your financial goals.

Check out our blog for more information on how to guide your investment and enhance your ROI.