Financial Institutions - Comparing The Alternatives

Financial Institutions are usually thought of by most people as Banks. Alternative Financial Institutions such as Credit Unions are said to offer the consumer a viable alternative to the banks as they have similar or identical products. There are an ever growing number of non-banking Financial Institutions such as Trust Companies, Mortgage Lenders and Insurance Companies all providing financial services to clients. Depending on local laws, some Financial Institutions can be subject to financial supervision from a government authority or regulatory body.

Financial Institutions compete in the market place to win new account holders' business. In order to attract business, some of these Financial Institutions may use many various selling techniques include advertising, telemarketing or in branch product endorsement. The collective range of services offered can be overwhelming for the client when choosing or comparing the right Banking Institution or Insurance Company.

Banking centers have changed much since deregulation. Deregulation in the banking industry has resulted in the removal or reduction of government regulations and restrictions that affect the operation of Financial Institutions. In theory it is believed that fewer the regulations results in more competition, increased productivity, efficiency and lower rates, fees and charges.

Comparing Financial Institution Alternatives

Savings Bank

A Bank is an institution that handles deposits, withdrawals and transfers, including international money transfers. A Bank can provide a range of banking products and services to their customers. These products include Transaction Accounts, Savings Accounts, Check Accounts (Cheque), Investment Accounts, Credit Cards, Personal Loans, Home Loans, Travel Insurance, Car Insurance, Boat Insurance, Home and Content Insurance, Personal Insurance, Share Trading Accounts, Foreign Currency Accounts, Managed Funds and Investment Portfolios. The main objective of a bank is to make a profit for the shareholders. Bank accounts generally have fees associated with their use.

Credit Unions

Credit Unions are financial co-operatives. Credit Unions are entirely owned and operated by its customers who may save, invest and borrow with that same institution. These peoples are known as members. Each member is both a customer and a shareholder of the business and therefore has a say in the way the funds are managed. When comparing Credit Unions to Banks, the distinguishing difference is that profits made by Credit Unions are returned to all its members and not the shareholders alone. These profits are generally passed onto the members by offering interest on Savings Accounts, decreasing interest rates on loans and offering services to the communities. Credit Unions are considered by many borrowers as a viable alternative to the Banks.

Building Societies

Building Societies are financial organisation's that mainly focus on lending money . When comparing Building Societies to a Bank, one sees that the range of products can be similar i.e. Savings Account and Credit Accounts. A building Society is owned by its members (not shareholders). These members are borrowers and savers with the society. Building Societies do not pay dividends to shareholders so they can pass this saving on to members.

Mortgage Brokers

Mortgage Brokers primarily lend money to their customers. Mortgage Brokers generally lend funds to purchase a family home or investment property. A Mortgage Brokers role it is to find their client an appropriate lender for the purpose of obtaining a loan. Mortgage Brokers look at their clients financial needs, and then research the most appropriate and best suited mortgage available on the market. Mortgage Brokers generally operate independently and therefore should not be influenced by any Financial Institutions. Depending on the success of the sale, Mortgage Brokers are paid a fee which can either be paid by the lender or the borrower. The fee paid will depend on the particular Mortgage Broker or the company that they represent.

Insurance Companies

Insurance Companies are a financial institution that provide protection to their clients, by covering private or business assets against a specific loss over a period of time. This protection is secured by the payment of a regularly scheduled premium. In most cases, if a claim is made an excess is required to be paid. This excess payment helps keep premiums low. The contract or insurance policy is between the insured and the insurer. The Insurance Company provides the insured with insurance cover should the insured suffer a specific loss e.g. theft. Insurance is sometimes marketed by the Insurance Company offering "peace of mind ". Insurance is designed to financially protect and insure the household against suffering an illness, suffer a personal or material loss.