Principles of Professional Practice to work in the Financial ...

1. Principles of Professional Practice to work in the Financial Services Industry

3. Main Sectors of Financial Services Industry Accounting Insurance Retail financial services Lending services Banking Financial planning Credit Management Credit & lending services Mercantile management Finance & mortgage broking Conveyancing Risk management Worker compensation

4. Accounting The American Accounting Association define accounting as follows: "the process of identifying, measuring and communicating economic information to permit informed judgements and decisions by users of the information!. Branches of Accounting: Cost and Management Accounting Financial Accounting Auditing Tax Accounting

5. Accounting Accounting businesses offer a wide range of services: Accounting services Financial Advice Grant loans or intermediate loans between clients Deal in insurance and superannuation produces and / or advise on these products Invest clients funds

6. Insurance Insurance companies offer a range of services: Life & general insurance products Invest policy holders funds Make loans to policy holders

7. Retail financial services Retail companies offer a range of services: Sell retail produce Offer credit to purchases of their retail products Offer electronic funds transfer services at point of sale (EFTPOS) Some offer cash withdrawals to bank clients on their debit cards

8. Lending services Lending services are provided by a variety of business such as: Finance companies Building Societies Merchant banks Cash converters stores (pawnbrokers) Some company just set up as lending services Pastoral Societies (eg Elders) Mortgage brokers (Aussie Home Loans)

9. Banking Banking in Australia is made up of four major banks and a number of smaller banks and community banks that operate in the retail banking sector and some foreign banks that mainly operate in the wholesale banking sector.

10. Banking The retail banking sector is made up of: Commonwealth Bank National Bank ANZ Bank Westpac St George Bank Bendigo Bank Queensland Bank

11. Credit Unions There are wide ranges of credit unions many of which offer full banking services to their members such as: Victorian Teachers Credit Union The Police Credit Union Australian Defence Credit Union

12. Financial planning There are many business set up with the sole aim to give clients advice on financially planning for their future. Some of the larger businesses in this area are subsidiaries of or a partially owned by larger financial organisations, in the market there are also small providers. These business: Give advice on wide range of investment products They manage the investments for their clients They give advice on superannuation funds They manage superannuation fund for their clients

13. Post Office Post offices now act as agents for a number of banks taking: Deposits Withdrawals and Credit card payments They accept payments as collection agents for many other businesses especially utility providers such as: Telstra accounts Origin Energy accounts Water rates etc

14. Credit Management Credit management agents also manage and collect credit repayments on behalf of other companies many companies now outsource their accounts. This also includes companies who collect outstanding debts (generally bad or doubtful debt) on commission of other companies

15. Credit & lending services There are a range of companies that offer these services such as the RACV, some car manufacturers have their own finance business and offer finance to the purchases of their own product

16. Mercantile Management These are companies who give advice to other companies generally large companies in relation to international trade. They: Advise on mercantile law between countries Shipping / airfreight procedures Documentation Types of terms & conditions available Advice on financial arrangement Sometimes offer finance Insurance Introductory services to agents and / or prospective importer or exporters

17. Finance & mortgage broking This is a relatively new area in the financial services industry. Instead of going directly to finance provider the person goes to the mortgage broker�s who organises the best loan deal for their client. The mortgage broker has a large number of finance providers on their books and is trained to compare and select the best loan deal for their client There are also mortgages brokers such as Aussie Home Loans and Wizard Home Loans that are know as mortgage brokers because they finance their loans by a process called securitisation.

18. Conveyancing Conveyancing is done by conveyancing agents and sometimes by solicitors. They check all the legal documentation involved when purchasing or selling a real estate. Thy check: The Title is in order and there are no caveats They check the standing of the property in relation to outstanding rates and taxes They check that there are no notices against the property in relation to developments or access They check all property transfer documents are completed and signed in accordance with the requirements They check the settlement documentation is all in order and that settlement sums are for the correct amount They often attend the actual property settlement

19. Risk management These are people who are employed by a project manager to assess the possible risks, the degree of risk and or the possible ways of overcoming any risks that may be involved in a particular large project. These managers specialise in assessing risk whereas he project manager may not have the specialised skills to assessing the risk of specialised projects such as financing the setting up of an oil rig in bass straight. They assess whether a project is viable and in some instances advise on changes that could be made to make a project viable.

20. Workers compensation Generally worker�s compensation claims are generally dealt with through a law firm. Cases are sometimes for small one off claims others for large claims with many people suffering from the same cause. Some lawyers specialise it taking worker�s compensation cases and often run these as case actions if there is a common cause for the compensation for example the asbestos case against James Hardie They are responsible to ensure compensation to the victim is sufficient to cover for injury costs, loss of income past, present and in some cases future earnings

21. MONETARY POLICY Monetary policy is used to stimulate or slow down economic activity/growth by influencing the size of the money supply or the cost of money (interest rates). Monetary policy indirectly affects bank lending and credit creation activities by affecting: �������� Interest rates �������� Availability of funds The main instrument of monetary policy at the present time is Open Market Operations (OMO)

22. VALUE OF THE AUSTRALIAN DOLLAR Changes in the value of the Australian dollar impinge on all areas of business that involve international transactions and on the financial institutions own trading in foreign currencies. (DIRTY FLOAT) If the Federal Government via the Reserve Bank or the Reserve Bank itself, wishes to raise the exchange rate for the $A it buys $A on the market, this pushes up the price of the $A. If the Federal Government via the Reserve Bank or the Reserve Bank itself, wishes to reduce the exchange rate for the $A it sells $A on the market, this reduces the price of the $A.

23. LOWER EXCHANGE RATES 1.����� Lower exchange rates encourage exports, as the prices of our goods become cheaper overseas. 2.����� Lower exchange rates discourage imports as the prices on imports become more expensive 3.����� Lower exchange rates make loan repayments on overseas loans greater in value and increase the debt. 4.����� Lower exchange rates may lead to more overseas investment in Australia if there is sufficient confidence in the economic future of Australia. 5. Lower exchange rates generally improve the Balance of Trade but increase interest payment to overseas.

24. INTEREST RATES �������� Compensation to the lender for giving up liquidity �������� The cost to the borrower for the opportunity the loan affords him/her. �������� The annual rate of return on the market price of security �������� The ratio between dollars paid per year and dollars borrowed FACTORS AFFECTING INTEREST RATES �������� The amount of risk involved �risk premiums� �������� The maturity term �������� Degree of liquidity of the asset �������� Administrative costs �������� Inflation

25. RELATIONSHIP BETWEEN INTEREST RATES IN AUSTRALIA AND OVERSEAS �������� Heavy influence of overseas interest rates because of Australia�s high international debt levels� �������� Interest rates in Australia tend to be higher than the USA and Japan �������� Degree of risk lending to Australia �������� Relative inflation rate in Australia compared to overseas rates

26. IMPACT ON FINANCIAL SERVICES INDUSTRY The stability of interest rates impact on the financial services industry in many ways. Interest rates are the cost to the borrower of borrowing money Businesses decision to borrow Businesses will borrow as long as the profits they make using the borrowed funds is sufficient to cover the cost of interest plus return a profit margin Consumer decision to borrow Consumers tend to borrow more if rates are low If rates are high they borrow less Interest are unstable customers become nervous & delay borrow Financial institutions lending margins If rates are unstable it makes it difficult for financial institutions to calculate their interest rates differential and may therefore lead to losses.

27. POLITICAL CLIMATE A stable political climate encourages private individuals as well as businesses to both spend and borrow provided interest rates are at an acceptable level An unstable political climate a general lack of confidence in the market and will lead both private individuals and businesses to defer spending and borrowing until confidence is restored in the market

28. MEDIA, PRESS & PUBLIC RELATIONS REPORTS The media and press have a major impact on the general publics understanding of the local and world affairs and the economic situation world wide. The majority of the population does not have access to or the resources to obtain the information they need to make informed decisions on local and world affairs and economic situations. What is presented in the press and media s strongly influenced by the views of those that give financial support to the organisation or pay for the advertising. A lot of resources are spent on adverting in the media and press that is aimed at influencing our buyer behaviour especially on financial services products. Sponsorship at major sporting events also targets particular sectors of the finance market and put their brand name before many viewers. Public relation reports do not have such a strong impact on the publics and businesses decision making as they are generally only circulated amongst interested parties