Financial intermediation is a critical process in the financial industry that involves connecting surplus and deficit agents.
Financial intermediaries, on the other hand, are financial institutions that act as middlemen between these agents.
Their primary role is to channel funds from individuals with extra money, commonly known as savers or lenders, to those who want to borrow money, also known as borrowers.
The significance of financial intermediaries in the flow of money cannot be overstated. Without their services, it would be challenging for investors to find individuals or organizations willing to borrow their money for investment purposes.
Financial intermediaries work with investors throughout the process of looking for investments or purchasing securities, usually earning money from fees and commissions.
Financial intermediaries can take on different forms and may or may not provide specific information or advice on certain topics.
The extent of information they offer depends on the agreement between them and their clients or the type of relationship they have.
Some financial intermediaries merely act as middlemen between lenders and borrowers and are not required to provide vital information to either party.
Various individuals and institutions can serve as financial intermediaries, relying on their networks and connections to bring savers and borrowers together.
Some of these intermediaries include banks, credit unions, financial advisers, insurance brokers, investment bankers, traders, portfolio managers, wealth managers, mutual fund companies, stockbrokers, and pension funds.
Given the crucial roles they play and the significant amount of money involved, financial intermediaries are subject to strict laws and regulations.
Certain states require financial intermediaries to maintain a specific amount of money or a list of assets on hand for security purposes.
Investors are also encouraged to conduct business only with licensed and registered brokers or agents, as well as registered banks and other financial institutions.
Financial intermediary companies typically hire qualified individuals, with a good understanding of the financial industry.
A degree in Finance, Management, Banking, or Commerce can increase one’s chances of landing a job in a financial intermediary company.
Those coming from different fields should undergo finance training and may consider enrolling in a stockbroker training program to gain an understanding of essential investment sector topics.
A stockbroker can assist clients in investing their money in stocks from publicly-traded companies, but they must be licensed before conducting business with clients.
A stockbroker is only one of many career options in the specialized field of financial intermediaries, and proper finance industry training is critical to succeeding in this industry.
Conclusion
Financial intermediation is a crucial process that connects surplus and deficit agents in the financial industry.
Financial intermediaries serve as middlemen in this process, and various individuals and institutions can play this role.
However, given the importance of their roles and the amount of money involved, financial intermediaries must adhere to strict laws and regulations.
For those interested in pursuing a career in financial intermediation, a good understanding of the financial industry and proper training are critical.
