Role of Merchant Banking Services in Our Economy

Merchant banks found its origin in the early periods in the country of Italy by the Italian merchants. The main function of the merchant banking services include providing financial advice and services to corporate as well as individuals. These banks act as a sort of intermediary between capital issuers and the buyers of the securities. These securities are issued by different companies in the stock markets to raise funds.

The Necessity of Merchant Banking Services

The economy of the country is often afflicted with different unpredictable conditions like inflation, unemployment, stagnation and so forth. The need to sustain a steady growth is necessary for corporations and individuals which is possible only with a long term strategy and financial options. The merchant banking services provide solutions and financial options.

These banks provide advisor services to clients based on a particular fee. They also provide other financial services to mergers and clients. It is the only financial institute that invests its capital in the clients’ company. It acts as an intermediary between those who possess capital and those who need capital.

To help their clients with a number of financial options, the merchant banking services operate in a number of countries all over the world. In this manner the clients have the opportunity to survey the different financial options to ensure better growth.

Functions of the Merchant Banking Services

These banks have a number of functions and some of the most important among them include:

Raise funds: one of the main functions of this banker includes helping the clients’ company to raise funds from the markets. The banks help to manage equity offerings and debt. This function further includes underwriting support, pricing and marketing of the issue, stock exchange listing, allotment and refund, offer document registration and so forth.
Offer advisory services: these banks also offer advisory services to its clients for a proposed fee.
Security distribution: the functions of these banking services also include distribution of different types of securities like fixed deposits, equity shares, mutual fund products, commercial paper and debt instruments.
Aid in projects: these banks also provide aid in the projects undertaken by the clients by helping them to visualise the concept of the project. The feasibility of the project is also analysed by these banks. The clients are also given support to prepare project reports.
Overall financial reconstruction: the merchant banking services provide better financial options and solutions to the clients. They help the clients to raise funds through cheaper resources. With the aid of other financial institutions, these banks also help to revive the sick units of the clients’ companies.
Offer advice on management of risks: another important function performed by these banks includes providing timely advice on risk management. The merchant banker provides advice on different strategies adopted by the clients.
Today the merchant banking services provide a number of other services like loan syndication, credit acceptance, counselling of mergers and acquisitions, management of portfolio and so forth. They also assist companies with short term liquidity funds. In a nutshell, these banking services are indispensable as they support individuals and corporate to expand their business ventures.

Private Banking Services Vs Retail Banking

Private banking is a much more personalized banking service given to individuals who invest substantial sums, typically over U$S1M. The most noticeable difference between retail and private banking services are that private clients receive customer service on a 1-1 basis via a relationship manager or a private banker. Wealthy individuals with private accounts can expect to meet their bank contact in person, and have direct phone access to a relationship manager. Usually the private banking arm of a bank is separate from the retail banking arm and the service is completely distinct.

A private bank is one that is not incorporated. Private banks are favoured by conservative investors because the directors are personally liable, and more likely to be cautious in managing client funds. Financial institutions like these are sometimes family owned and only cater to the very rich. One of the reasons why wealthy people choose them is their confidentiality – a pledge to maintain client records secret. For some it is a case of not wanting to be targeted by criminals, lawsuits or corrupt governments. Others use this secrecy to shield income from authorities like the IRS and evade tax.

Many of the world’s private banks are found in Switzerland because of the strict bank secrecy laws and sophistication of Swiss financial services. Small banks in countries like Switzerland are also more likely to keep their client records secret because they limit their operations to within the country’s bank secrecy laws.

Not only private banks offer private banking services – in fact some of the biggest providers of private banking and wealth management services like UBS, Credit Suisse and the Barclays are not privately owned. Private clients of these huge banks can take advantage of their in-house trading and research departments, and sometimes choose to have almost all their assets managed by the bank. This way they expect much higher returns than those given by a simple savings account or certificate of deposit.

Types of Private Banking Services

Usually only very affluent clients demand wealth management – where private bankers manage an investment portfolio for a family or an individual. The fee for this service varies from bank to bank and is charged yearly as a percentage of the total amount invested. The return of a portfolio will also depend on the standard of the private banking service. While some will provide excellent returns, others will continue to charge high fees while investing client funds in the bank’s own investment funds, regardless of whether or not this is beneficial to the client.

A popular alternative to wealth management is Self-Directed private banking, where the client manages his own portfolio, at times calling on advice from the bank. The advantages of this type of account are lower fees and greater personal control.

Inheritance and tax planning are extra private banking services provided either directly or by referral for an extra fee.

Personal Banking

Personal banking is similar to retail banking. The essence is that the products and services of the bank are tailored to meet individual banking and ancillary needs, including everything from a checking account to investment advice. The different products available through personal banking include checking accounts, savings accounts, CDs, check cards with rewards, different types of loans, and personal lines of credit, credit cards, personal trust and private banking services, mortgage programs, investment management, discount brokerage, insurance services and advisory services. Insurance, investment advice, and wealth management are high end products offered in personal banking.The most prominent feature in personal banking today is technology- enabled, customized products and services like anywhere banking, ATMs, and the delivery of services through channels like a telephone and the Internet. The idea is that the customer need not come to the branch for their services and that everything should be delivered to the customer at his convenience. The bank will provide single window service, meaning that customers can visit one counter for any banking need.Personal banking is quickly catching up in almost all the countries in the world and is expected to contribute significantly to the bank’s total revenue. Almost 15-20% of the customers contribute up to 90% of the banks business, so proper service to these customers will deepen the financial relationships.Everyone with a personal bank account needs to be very cautious and pay close attention to all aspects of their account. People should promptly review their bank statement, avoid having to pay unnecessary fees and bank charges, avoid leaving discarded bank documents behind, avoid banking online in public places, and periodically change their password.

Banks’ Retail Banking Services

Banks are institutions that handle a variety of transactions and services that are usually centered on money, finances and investments. There are many different kinds of these institutions such as private, public, savings and investments places. The services that come with them are usually similar to one another with slight differences according to the kind of institution it is.Retail Services
These kinds of services are usually found in the more common banks that cater to the private individuals and some corporations. The services include, but are not limited to, accounts for savings, checking, money market, individual retirement and current. Other services may include issuance of credit, debit and ATM cards. The issuance of the certificate of deposit and the opening of a credit line may also be part of the services that these institutions may offer their clients and investors. Accounts refer to the different kinds of access that a person or company may deposit their monies and investments in. Savings is the most common one and it may require a lower maintaining balance compared to other accounts. Checking and current accounts are authorized to issue checks and drafts that may be considered as good as cash if there is sufficient money in the account. Money market is an endeavor that earns bigger interest compared to most account but carries some risk of losing part or all of the investment as well. In individual retirement account, the savings of an individual from the government might go automatically to the account where it will earn sufficient interest that may be higher than the average savings. The issuance of cards, including but not limited to credit, debit and ATM cards are the usual service of most, if not all banks. These cards give depositors direct access to their finances in such a way that they do not need to go to the bank to facilitate the transaction. The transaction can be done via the Internet, the telephone or through an ATM machine.Certificates are often issued to support the fact of the deposit. There are reasons why a depositor might need certificates of his or her deposits issued and the institution needs to be able to give these documentation and verification to them. The different accounts can be listed on the certificate or the depositors or investor might request for only specific accounts to be stated in them. There may be fees that need to be paid but these are only minimal. Loans are also another service many of the banks investors and clients appreciate. There are many different kinds of loans that can be opened through banks and these have a variety of stipulations and conditions that need to be discussed thoroughly by both the representative of the financial institution and the person who wishes to borrow.These are just a few of the services that banks offer their clients. There are other services that may be offered in other institutions but are not present in others. It is best to thoroughly discuss the services that may interest the depositor or the client.