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UNDERSTANDING
FINANCIAL
INDUSTRY
All rights reserved.
Ula Academics
IS WALL STREET INTRIGUING,
PERPLEXING OR SOMEWHAT
MYSTERIOUS?
Some people love the energy of being in
the Financial Markets and Wall Street while
others are simply intrigued by the industry..
In this session, let’s widen our
understanding of the financial industry, the
different players and classification..
WELCOME MESSAGE
LETS GET STARTED
LIST OF CONTENT
PRESENTATION
Understand Buy and Sell-side
OVERVIEW OF THE INDUSTRY
01
In depth discussion.. and what they do..
THE PLAYERS AND DIVISIONS
02
Some other players that have emerged
OTHER FINANCIAL PLAYERS
03
A few notable crisis..
MARKET CRISIS AND CONTAGIONS
04
05 Final discussion and next steps..
CONCLUSION
Consumer Banking
OVERVIEW OF THE INDUSTRY
Coporate Banking Investment Bank Brokerages
Private Bank Asset Management
*Sales, sales support
*Product solution
*Trading and operationss
*Compliance
*Sales, sales support
*Product solution
*Trading and operationss
*Compliance
*Equity Research
*Prime Solutions
*Sales & Trading
*Investment Banking
*Sales, sales support
*Product solution
*Trading and operationss
*Compliance
*Independent brokerage
and trading providers
*Mutual, hedge funds
(various strategies)
*Pension funds
*SWFs, endowments
Insurance
*Sales, sales support
*Product solution
*Trading and operationss
*Compliance
MNCs / Government
Fintechs
SELL SIDE BUY SIDE
*Note that classification is not that
straightforward as Insurance
companies can be considered ‘buy-
side’ as their investment arm are
huge buyers of investment assets.
We illustrate with a possible
interpretation.
GENERAL COMMENTS
Going by the explanation, BUY SIDE are basically players
that have the capital and SELL SIDE are parties and
players that provide related financial services to
individuals and buy-side players..
However, this may also lead to some confusion because
Insurance companies provided insurance and financial
services but their investment arms are huge buy-side
players... Similarly mutual funds are considered institutional
companies but they regularly have to solicit investments
either from other buy-side players or individuals...
We go inside each of the categories to clarify..
There has been many ways of describing the MAIN role of
financial markets.. Such as
‘ Connecting parties that have capital and parties that require
capital...’
And that is a definition we can get started with..
CONSUMER BANKING
1.
Think of consumer banking as the traditional banking branches where there is a teller
providing money exchange as well as banking services.. the ATM machines where money can
be withdrawn.. the credit cards and mortgage services that you may require assistance with..
Basically, consumer banking and consumer banking services are tailored to every-day working
class investor..
Services provided are more fixed and less customizable.. You may have heard of the term
RELATIONSHIP MANAGERS who can be financial advisors for retail customers.. They typically
go through RISK PROFILING and recommend products that have been initiated by the product
teams..
FOR YOU AND ME THE EVERY-DAY INVESTOR..
THINK BANKING BRANCHES, ATM / CREDIT CARDS AND TELLER SERVICES..
2. CORPORATE BANKING
Now, if we have a division in banks servicing individuals, it makes sense to also have
another division servicing companies..
After all, companies have hedging, liquidity and investment needs.. They may also require
invoicing, factoring services, loans..
For instance, if American Airlines need to hedge their balance sheets against a rise in oil
price, guess who would their Finance department be liaising with?
Well, they would probably be calling their corporate banker!
SERVICING COMPANIES..
3. INVESTMENT BANK
Now the words Investment Bank and Investment Banking have been in the news alot..
(Think Goldman Sachs, Morgan Stanley etc) So it can perhaps be assumed that most
maybe slightly more familiar with this function...
Indeed, investment banking divisions play a key role in helping companies to raise equity
or debt and are often called in during situations of Mergers & Acquisition as well as
restructuring..
However, did you know that the Research Function is also typically within the Investment
Bank? Although there may also be dedicated research teams in Wealth Management
divisions.. Prime Brokerage as well as Sales & Trading divisions (basically providing
financial services to big buy-side institutions) are also part of the Investment Bank...
They typically interact mostly with other financially sophiscated finance professionals as
opposed to individual clients that may not be from financial backgrounds..
EQUITY / BOND RAISING, MERGERS & ACQUISITION ETC..
PLUS OTHER FUNCTIONS..
4. PRIVATE BANK
Now we have gone through retail banks and we know that Retail / Consumer banks
typically service every-day investors like me and you..
Private Banks are for higher net worth individuals; typically with net investable assets
excluding houses of minimally USD1million..
However, it is also common for private banks to raise the thresholds to USD5million and
to charge fall below fees as well..
ULTRA HIGH NET WORTH Individuals (UHNW) typically have net investable assets of
around USD30 million (varying threshold definitions..).. Private banks then differ from
consumer banks in terms of level of service, sophiscation of products and customizability..
For instance, it is possible for private bank clients to get access to investments typically
reserved for institutions such as Interest Rate Swaps and they can also get access to more
highly sought hedge funds or co-investment opportunities..
SERVICING HNW INDIVIDUALS AND FAMILY OFFICE
4. PRIVATE BANK
FAMILY OFFICE is a relatively new segment but has been growing tremendously.. Single
Family office typically refers to one UHNW individual setting up his or her family office
while Multi Family Office refers to a company which helps manage investments for
multiple family offices.. A Multi Family Office therefore, may sometimes be competing for
a client’s Share of Wallet with private banks..
SERVICING HNW INDIVIDUALS AND FAMILY OFFICE
5. BROKERAGES
They are usually lower cost trading providers compared to banks (for instance, banks may
also have their trading platforms to allow individual customers to buy stocks, shares
through but fees are typically a lot higher compared to some individual trading
providers...)
While E-trades, Charles Schwab may be targeted more at individual traders, Interactive
Brokers target smaller institutional players who may find it too expensive to be utilizing
bank’s trading platforms..
TRADING PROVIDERS SUCH AS E-TRADE, CHARLES SCHWAB
6. INSURANCE
AIG, AIA, NORTHWESTERN MUTUAL, PRUDENTIAL ETC
Most people like me and you have at least one insurance policy; whether its a life, term
life, whole life or health insurance plan...
They can be considered sell-side players as they are, providing their services and products
to individuals but at the same time the Investment Arms of Insurance Companies are
some of the largest buyers of bonds.. (in fact, they usually invest in long-dated bonds for
asset-liability matching purposes...)
Their investment arms are therefore some of the biggest institutional buy-side player in
the market..
7. ASSET MANAGEMENT
MUTUAL FUNDS, PENSIONS FUNDS, ENDOWMENTS ETC
Well, it is not easy to introduce all buy-side asset managers in one slide and in a single
breath because they are all so different but here, we would attempt to do so...
Mutual Funds are some of the biggest institutional buy-side companies in the World, and
they typically invest on behalf of many individual customers and sometimes, other
institutional companies such as Family offices and so on.. Think of Franklin Templeton,
PIMCO, each who are known for their unique positionings (example, PIMCO is well known
for their bond funds...) Each mutual fund is managed based on its mandate which fund
managers would have to adhere to..
Pension Funds are also another big institutional buy-side player in the market.. And we
have also heard of the Harvard and Yale Endowment fund (the latter of which was
managed by the late David Swensen who popularized his endowment fund investment
management philosophy..) .. Then, also throw in Sovereign Wealth Funds (SWFs) into the
mix...
In all, these big institutional players have huge investment power and collectively
account for a big portion of the financial markets..
8. OTHERS
GOVERNMENT, MNCS, FINTECH PLAYERS..
Of course, the financial eco-system is not just made up for banks, mutual funds,
institutional players and so on...
We also have the Fintech players! The Crypto-currency companies! Finance divisions of
Multi-national companies such as General Electric! Walt Disney! all whom are part of the
financial eco-system..
FinTech is quite a new segment.. While we did not mention Robinhood under Brokerages,
they are indeed a Financial brokerage provider as well, and their innovations have
broadened accessibility to investing..
MARKET CRISIS AND CONTAGION
Why are we talking about Market Crisis in an introductory class
on Financial Markets? When we are introducing all the players
in the Financial Eco-system??
Well, this is because the Bull and Bear Market as well as Market
Crisis is a huge part of how financial markets function..
We can all remember the 1987 Black Monday triggered by
computerized portfolios, Dot-com boom of the 2000s, 2008
sub-prime crisis, the recent Silicon Valley Bank (SVB) collapse...
Each of these were little expected and happened fast.. Which is
why till today, we are still studying causes, hypothezing the
what-ifs in an effort to mitigate or be able to predict the next
crisis-in-making..
WHY THIS?
THE BULL AND BEAR MARKET..
CONCLUSION
Now, there are lots and lots to discuss about in terms of
function, role and products of each of these Financial
Market players.. We will look to a more detailed dive into
each of these players in the future lessons...
Please visit the next module in this Investing 101
course!
Financial Industry Eco-system
LEARNING ONE:
Broad overview of various players;
concept of Buy and Sell side
LEARNING TWO:
Other Financial Players beyond
traditional banks
LEARNING THREE:
Market Crisis and Contagion
LEARNING FOUR:
UNTIL THE NEXT
TIME!
All Rights Reserved.
Ula Academics.

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An Introduction to the Financial Industry and Finance Eco-system

  • 2. IS WALL STREET INTRIGUING, PERPLEXING OR SOMEWHAT MYSTERIOUS? Some people love the energy of being in the Financial Markets and Wall Street while others are simply intrigued by the industry.. In this session, let’s widen our understanding of the financial industry, the different players and classification.. WELCOME MESSAGE LETS GET STARTED
  • 3. LIST OF CONTENT PRESENTATION Understand Buy and Sell-side OVERVIEW OF THE INDUSTRY 01 In depth discussion.. and what they do.. THE PLAYERS AND DIVISIONS 02 Some other players that have emerged OTHER FINANCIAL PLAYERS 03 A few notable crisis.. MARKET CRISIS AND CONTAGIONS 04 05 Final discussion and next steps.. CONCLUSION
  • 4. Consumer Banking OVERVIEW OF THE INDUSTRY Coporate Banking Investment Bank Brokerages Private Bank Asset Management *Sales, sales support *Product solution *Trading and operationss *Compliance *Sales, sales support *Product solution *Trading and operationss *Compliance *Equity Research *Prime Solutions *Sales & Trading *Investment Banking *Sales, sales support *Product solution *Trading and operationss *Compliance *Independent brokerage and trading providers *Mutual, hedge funds (various strategies) *Pension funds *SWFs, endowments Insurance *Sales, sales support *Product solution *Trading and operationss *Compliance MNCs / Government Fintechs SELL SIDE BUY SIDE *Note that classification is not that straightforward as Insurance companies can be considered ‘buy- side’ as their investment arm are huge buyers of investment assets. We illustrate with a possible interpretation.
  • 5. GENERAL COMMENTS Going by the explanation, BUY SIDE are basically players that have the capital and SELL SIDE are parties and players that provide related financial services to individuals and buy-side players.. However, this may also lead to some confusion because Insurance companies provided insurance and financial services but their investment arms are huge buy-side players... Similarly mutual funds are considered institutional companies but they regularly have to solicit investments either from other buy-side players or individuals... We go inside each of the categories to clarify.. There has been many ways of describing the MAIN role of financial markets.. Such as ‘ Connecting parties that have capital and parties that require capital...’ And that is a definition we can get started with..
  • 6. CONSUMER BANKING 1. Think of consumer banking as the traditional banking branches where there is a teller providing money exchange as well as banking services.. the ATM machines where money can be withdrawn.. the credit cards and mortgage services that you may require assistance with.. Basically, consumer banking and consumer banking services are tailored to every-day working class investor.. Services provided are more fixed and less customizable.. You may have heard of the term RELATIONSHIP MANAGERS who can be financial advisors for retail customers.. They typically go through RISK PROFILING and recommend products that have been initiated by the product teams.. FOR YOU AND ME THE EVERY-DAY INVESTOR.. THINK BANKING BRANCHES, ATM / CREDIT CARDS AND TELLER SERVICES..
  • 7. 2. CORPORATE BANKING Now, if we have a division in banks servicing individuals, it makes sense to also have another division servicing companies.. After all, companies have hedging, liquidity and investment needs.. They may also require invoicing, factoring services, loans.. For instance, if American Airlines need to hedge their balance sheets against a rise in oil price, guess who would their Finance department be liaising with? Well, they would probably be calling their corporate banker! SERVICING COMPANIES..
  • 8. 3. INVESTMENT BANK Now the words Investment Bank and Investment Banking have been in the news alot.. (Think Goldman Sachs, Morgan Stanley etc) So it can perhaps be assumed that most maybe slightly more familiar with this function... Indeed, investment banking divisions play a key role in helping companies to raise equity or debt and are often called in during situations of Mergers & Acquisition as well as restructuring.. However, did you know that the Research Function is also typically within the Investment Bank? Although there may also be dedicated research teams in Wealth Management divisions.. Prime Brokerage as well as Sales & Trading divisions (basically providing financial services to big buy-side institutions) are also part of the Investment Bank... They typically interact mostly with other financially sophiscated finance professionals as opposed to individual clients that may not be from financial backgrounds.. EQUITY / BOND RAISING, MERGERS & ACQUISITION ETC.. PLUS OTHER FUNCTIONS..
  • 9. 4. PRIVATE BANK Now we have gone through retail banks and we know that Retail / Consumer banks typically service every-day investors like me and you.. Private Banks are for higher net worth individuals; typically with net investable assets excluding houses of minimally USD1million.. However, it is also common for private banks to raise the thresholds to USD5million and to charge fall below fees as well.. ULTRA HIGH NET WORTH Individuals (UHNW) typically have net investable assets of around USD30 million (varying threshold definitions..).. Private banks then differ from consumer banks in terms of level of service, sophiscation of products and customizability.. For instance, it is possible for private bank clients to get access to investments typically reserved for institutions such as Interest Rate Swaps and they can also get access to more highly sought hedge funds or co-investment opportunities.. SERVICING HNW INDIVIDUALS AND FAMILY OFFICE
  • 10. 4. PRIVATE BANK FAMILY OFFICE is a relatively new segment but has been growing tremendously.. Single Family office typically refers to one UHNW individual setting up his or her family office while Multi Family Office refers to a company which helps manage investments for multiple family offices.. A Multi Family Office therefore, may sometimes be competing for a client’s Share of Wallet with private banks.. SERVICING HNW INDIVIDUALS AND FAMILY OFFICE
  • 11. 5. BROKERAGES They are usually lower cost trading providers compared to banks (for instance, banks may also have their trading platforms to allow individual customers to buy stocks, shares through but fees are typically a lot higher compared to some individual trading providers...) While E-trades, Charles Schwab may be targeted more at individual traders, Interactive Brokers target smaller institutional players who may find it too expensive to be utilizing bank’s trading platforms.. TRADING PROVIDERS SUCH AS E-TRADE, CHARLES SCHWAB
  • 12. 6. INSURANCE AIG, AIA, NORTHWESTERN MUTUAL, PRUDENTIAL ETC Most people like me and you have at least one insurance policy; whether its a life, term life, whole life or health insurance plan... They can be considered sell-side players as they are, providing their services and products to individuals but at the same time the Investment Arms of Insurance Companies are some of the largest buyers of bonds.. (in fact, they usually invest in long-dated bonds for asset-liability matching purposes...) Their investment arms are therefore some of the biggest institutional buy-side player in the market..
  • 13. 7. ASSET MANAGEMENT MUTUAL FUNDS, PENSIONS FUNDS, ENDOWMENTS ETC Well, it is not easy to introduce all buy-side asset managers in one slide and in a single breath because they are all so different but here, we would attempt to do so... Mutual Funds are some of the biggest institutional buy-side companies in the World, and they typically invest on behalf of many individual customers and sometimes, other institutional companies such as Family offices and so on.. Think of Franklin Templeton, PIMCO, each who are known for their unique positionings (example, PIMCO is well known for their bond funds...) Each mutual fund is managed based on its mandate which fund managers would have to adhere to.. Pension Funds are also another big institutional buy-side player in the market.. And we have also heard of the Harvard and Yale Endowment fund (the latter of which was managed by the late David Swensen who popularized his endowment fund investment management philosophy..) .. Then, also throw in Sovereign Wealth Funds (SWFs) into the mix... In all, these big institutional players have huge investment power and collectively account for a big portion of the financial markets..
  • 14. 8. OTHERS GOVERNMENT, MNCS, FINTECH PLAYERS.. Of course, the financial eco-system is not just made up for banks, mutual funds, institutional players and so on... We also have the Fintech players! The Crypto-currency companies! Finance divisions of Multi-national companies such as General Electric! Walt Disney! all whom are part of the financial eco-system.. FinTech is quite a new segment.. While we did not mention Robinhood under Brokerages, they are indeed a Financial brokerage provider as well, and their innovations have broadened accessibility to investing..
  • 15. MARKET CRISIS AND CONTAGION Why are we talking about Market Crisis in an introductory class on Financial Markets? When we are introducing all the players in the Financial Eco-system?? Well, this is because the Bull and Bear Market as well as Market Crisis is a huge part of how financial markets function.. We can all remember the 1987 Black Monday triggered by computerized portfolios, Dot-com boom of the 2000s, 2008 sub-prime crisis, the recent Silicon Valley Bank (SVB) collapse... Each of these were little expected and happened fast.. Which is why till today, we are still studying causes, hypothezing the what-ifs in an effort to mitigate or be able to predict the next crisis-in-making.. WHY THIS? THE BULL AND BEAR MARKET..
  • 16. CONCLUSION Now, there are lots and lots to discuss about in terms of function, role and products of each of these Financial Market players.. We will look to a more detailed dive into each of these players in the future lessons... Please visit the next module in this Investing 101 course! Financial Industry Eco-system LEARNING ONE: Broad overview of various players; concept of Buy and Sell side LEARNING TWO: Other Financial Players beyond traditional banks LEARNING THREE: Market Crisis and Contagion LEARNING FOUR:
  • 17. UNTIL THE NEXT TIME! All Rights Reserved. Ula Academics.