Overview of the Personal Finance Industry
The personal finance industry is made up a huge number of specialist financial organisations which provide products and services that can help individuals and families manage their financial assets and affairs. Personal Finance products are meant to cater for the lifestyle needs of consumers and families. For example, the ability to borrow, plan and budget, save, invest and spend money are all made possible by personal finance products and services.
The personal finance industry is a complex and highly regulated area of any economy. Most countries have different regulatory arrangements, regimes and central registers of money management companies. These protect consumers rights by making it harder for rogue firms to operate, as well giving consumers the knowledge and confidence they are dealing with an 'approved' firm. Similarly, many countries require any individuals offering personal financial advice to have minimum levels of professional proficiencies, qualifications and gone through personal background checks before being allowed to advise.
The industry has high levels of competition and innovation. This has led to a seemingly endless series of financial choices for consumers. For example, the growth of price comparison websites (or 'financial aggregator's as they are sometimes referred), has caused some controversy by leading consumers to believe the cheapest deal is always the best and most appropriate deal for their individual circumstances. Yet millions of consumers have turned to price comparison services to take advantage of easy-to-use comparative features and click and buy functionality. Many of us choose to buy financial products online (rather than seek professional advice), to download policy documents quickly and cheaply.
Many qualified independent financial advisers may be able to give research advice and guidance on product range. Most 'tied-agents' financial brokers are authorised to sell selected products (such as mortgages, loans, savings accounts, household insurance overseas, income protection and life insurance). Professional advisers are indispensable in highlighting differences in product features and the level of risk associated with a financial decision. Many products are created and marketed based on life changing events or situations (such as an imminent birth, buying a new home, redundancy, imminent retirement, or unexpected health issue). Other products are designed and marketed to assist consumers who have an immediate lifestyle need (such as get hold of a payday loan, car finance or a debt consolidation).
Most interviews with an advisor will start with a comprehensive 'fact find'. This aims to establish a consumer's financial goals, attitude towards risk, personal financial circumstances, and then highlight the advantages and disadvantages of possible product solutions available. This process helps to identify inflows and outflows into a household, to ensure products offered are affordable and suitable for the consumers need. This budgeting process is vital as most personal financial products are charged on a recurring basis ( such as annual household insurance policy, or a monthly mortgage repayment).
A professional financial adviser is great at helping to identify all aspects household budgeting that consumers themselves may overlook (but may which seriously affect the affordability and suitability of future product selections). The focus of personal finance is to ensure household security is underpinned by reserves (from and excess of salary and savings inflows after household expenses have been taken into account). This involves much budgeting, planning, transaction recording and tracking to ensure any financial plan is suitable for the long term.
When consumers getting financial difficulty, there are a host of personal finance companies who can help. For example, debt management companies, bankruptcy services and financial consultants may be able to put in place a product that lowers total debt or monthly debt repayments. Conversely, when affluent consumers have in excess of disposable income, there are a host of specialist providers set up to help spend and invest their money. These include online trading platform providers, offshore services, inheritance services, financial planners, personal taxation services and pension advisors. There are huge numbers of companies providing products and services to help consumers spend money (such as credit and debit card companies). There are also many service providers helping consumers exchange currency and transfer money.