Introduction
Financial institutions are the place to provide the financial service. In proper way, it is let people to buy or sell either to create or exchange the share. Financial institutions are collecting the fund from investors in financial asset, such as, deposits, loan, and bonds. There are most base on tangible properly. Besides that, financial institutions are controlled and supervised by the rules and regulation under by the Government. Financial institution also function mediator in the share market or debt security market.
The financial institution also provide the activity associated with stock, insurance, risk, investment, loans and other many types of activities. Not even that, the financial institution also will assist their client or investor to maximize their profit. Otherwise, the financial institution also prepares an educational program for the beginners who have interest to build up at financial market.
There are got 3 ways to transfers the fund or capital from saver to borrower. There are direct transfer the money to saver or borrower, indirect transfer through investment banking house and indirect transfer through financial intermediaries.
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2.1 Direct Transfer
First of all, it is through direct transfer. It refers to the movement of tax deferred retirement asset from one plan or another account to borrower. Direct transfer is not in charge any tax or penalties, so that, it will not considered being distributions. Mostly, this kind of transfer is using by electronic; it will take a several time to complete and past as safety and fast. Direct rollovers from qualified plans are a form of direct transfer. That means the investor will direct buy or sell their stock or bond through the financial institution.
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There got many advantage for the direct transfer, most basically is convenience to buyer and seller to trade their stock and bonds. Besides that, through the direct transfer, it will not need require from the financial institution, there for it will save a lot of time and cost. That is because through the internet, it will save a lot of time and no commission had been charge by the third party. Besides that, the business is delivers it securities to the saver, so that, the savers will direct input the money to the firm.
Be hiding of this advantages, there are many disadvantages for the saver and borrower. According by this, if the new beginner saver is lack of experience of investment, they will fully listen by the borrower although to make a wrong investment or cheat by the borrower. It will face to lose their money. Besides that, the securities are also a problem to let savers to worry up.
Indirect Transfer through investment Banking House.
Secondly, there is indirect transfer through investment banking house. This proper way mean that, the investor go through the banking house to invest. Investment banking house it can be refer to a financial institution to help an organization that underwrites and distributes new investment securities and help businesses obtain financing.
In other proper ways, the company may sell the funds or stock to the investment bank, there for, the investment bank will turn sell to the saver in the same securities. Through the investment bank, the savers can get a satisfaction price. Besides that, there is a process call as underwriting. An underwriter is serves as a middleman and facilitates the issuance securities. Become this, the company will pass the savers’ money and funds to the investment bank.
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The advantages of indirect transfer are the investment banks have the professional consultant to teach or give the suggestion to invest the money. Otherwise, through the investment bank, their agent will help you to invest the money, as a professional person, it will more safety.
Next, the disadvantages for this method is when use the money in charge to the investment bank, it will taking a period time to process. That is because the process going is needed to take a several time. Besides that, the banker also will throw some wrong information to confuse the investor. So, with any investment, there are many of risk to let people to handover.
Indirect transfer through financial intermediacies.
Lastly, the last way is indirect transfer through the financial intermediaries. Financial intermediaries are an institution act by between the investor and the company. Financial intermediaries are specialized agents by a financial firm that facilitate transfer the funds from the investor to the organization. Financial intermediary it may include chartered banks, funds, insurance, and investment dealers. Next, the intermediary will obtain the funds from the investor on exchange for it’s to own securities. There for, the intermediary will use the money to purchase or buy in and hold the businesses’ securities. The existence of intermediaries greatly increases the efficiency of money and capital market.
Through the financial intermediaries, they have provided many advantages for the investor. Make a major advantage is, the financial intermediaries have a professional knowledge on the investment. Under control by financial intermediaries, the risk also relative had been decrease. That is because, if have any emergence problem happened, the intermediaries can try to cover the other interest loan. But, if the savers borrow direct to business, the risk will face in personality.
Second advantages are financial intermediaries give the savers low cost advantage. If give to financial intermediaries, it can lead the economics of scale and save the cost. That is because; the financial intermediaries can reduce the cost to borrow.
Next advantages are liquidity given by the financial intermediaries. Through the asset convert into money, the financial intermediaries can make it quickly and faster. According this, the assets can more easy to transfer to other buyer.
For the disadvantage, do not trust all over to the intermediaries, which are because some of the financial intermediaries are trying to cheat people. Even that, if got any emergence problem had been happen, the intermediaries may be absconded with money. So, be careful is more good.
Conclusion
In short, there are three types of ways to invest the money, there are direct transfer, indirect transfer through investment banking house and indirect transfer through financial intermediaries. Lastly, when doing any investment, it will face some risk. Through a correct way as good as possible, it can reduce the risk.
