How to Find the Right Financial Services Firm

The global financial crisis has created one of the worst recessions since 1982 and this has caused millions of investors to have many sleepless nights as they struggle to find a strategy that will protect them during the bad times yet allow them to participate in the growth during times of expansion. While there is nothing wrong with this many financial services firms have promised the world yet undelivered on the promises that they made to their clients, causing them to lose money. The current economic situation underscores this lack of follow through which has taken place with in the financial services industry. In response to these different challenges many investors are now searching for those financial services firms that will protect them while providing consistent growth. To find the right firm for your situation requires that you consider a number of different factors.

Do they have a wide variety of different strategies that they can use? Whenever you are dealing with any financial services firm you want to make sure that they have many different strategies that you can use in both bull as well as bear markets to make money. What happens to most people work only with those firms which sound good, when it comes to strategy they have the one standard that they use on virtually all clients, buy and hold. This lack of ideas means that when the bear markets do come you could see sizable losses in your account as prices are cut dramatically.

What will be done to protect you against risk? Whenever you are investing in anything there will always be a certain degree of risk involved. To protect yourself from holding the Enron's of the world requires that you work with a financial services firm that will show you how you can protect yourself against the different forms of risk such as hedging, using sell stops or diversification.

Clearly choosing the right financial services firm can be challenging. However, by making sure that they offer a wide variety of strategies and knowing that that they have different ways to protect you against risk will help you to be able to avoid some of the severe declines which are known to occur during bear market and to participate in the growth associate with bull markets, helping you to have consistent profits.

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Investment Banking Companies

A bank which is involved in aiding companies in acquiring new funds, and advising them about different transaction they might engage in, can be called an Investment Banking Company. Funds can be generated by selling stock of the company itself in the capital market, or find out investors who are interested in venture capital. Sometimes they themselves will invest in private equity, for a stake in the company.

Apart from aiding funding, Investment Banking Companies involve themselves in a lot of consulting. They study and gauge the market conditions in order to forecast the best conditions for a company to make a public offering. The efficacy of this advice will make an Investment Banking Company stand apart from the others. If this advice given is not the correct one, then the whole plan of generating capital will fail, and the company might lose some reputation as not many people have bought their shares. Investment Banking Companies also give advice on mergers and acquisitions. This is another crucial area where the recommendation and advice, can make or break a company.

There are no fixed parameters, by which you can gauge, what makes one Investment Banking Company better than the other. One has to study their policies and their grasp of the market situation. For example, Citigroup's profits have been rising, as they have a higher debt underwriting and M&A advisory fees. They have a strong equity and successful emerging-market trading. In the first quarter of 2006 they were the leading underwriters of global debt issues and second in global equity underwriting.

The major factor that is responsible for the success of an Investment Banking Company is its ability to gauge the market situation and be able to forecast the repercussions of the same, on a company in the near future. The ability to forecast the profitability of a merger or acquisition also plays a major role. Some Investment Banking Companies are successful just by their underwriting operations. Credit Suisse has ranked first among underwriters of initial public offerings. They were able to gauge correctly the success of emerging markets like China, and their major underwriting proceeds came from China Construction Bank's $9.2 billion IPO offering.

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Credit Insurers to Be Hit by a Massive Rise in Premiums

Reinsurance premiums are expected to rise steeply in the months ahead as the credit crunch turns into a recession. As the renewal season gets into full swing, brokers expect that the major credit insurers, who offload risks to reinsurers through markets like Lloyds of London, will see a rise in premiums of more than 10 per cent.

A broker from Lloyds said that the rises were much greater than had been expected. However many people would think that they were getting what they deserved, given that they had withdrawn cover from so many companies recently.

The credit insurance industry covers businesses against bad debt, either through insolvency, or long term default by their customers. As the number of claims submitted by suppliers, increases, reinsurers are reviewing the rates that they will charge in future to buy risk.

80 per cent of the global credit insurance market is controlled by just a few companies, which include such leading players as Coface, Atradius and Euler Hermes. These companies have received a lot of bad press recently following the withdrawal of cover for suppliers to high street names like JJB Sports, DSG the owner of PC World and Dixons, as well as retailers in which Baugur, the Icelandic investment firm, had an interest.

Recently the decision by Atradius to reduce cover to the suppliers of PC World and Dixons resulted in their shares tumbling by more than 30 per cent in a single trading day. These three market leaders have also withdrawn cover to the ailing giants of the US car market, Ford Motor and General Motors, who have approached Congress for bailout funds following a dramatic fall in car sales.

A leading expert in the restructuring of companies felt that credit reinsurers had overreacted. Their knee jerk reaction had underlined their lack of understanding and knowledge of the companies. Rather than leaving themselves exposed they decided to withdraw cover to safe guard their interests come what may.

However this criticism was dismissed by a senior manager of a leading credit insurer, who said that the press loved stories of cover being pulled, as it boosted circulation, but there were many companies benefiting from credit insurance and these benefits would increase as the downturn deepened. Now was the time to act rather than be paralysed by fear, he said.

Gloomy predictions are rife as Britain slides into recession. Leading experts predict that business failures in the UK will rocket by over 50 per cent in the next year with the construction industry seeing the first wave of receiverships. 25 pre cent of all credit insurance policies in the UK are believed to be written for companies within the construction sector.

One question to which recent events inevitably give rise is whether we are likely to see a resurgence in insolvencies amongst reinsurers, along the lines of the early javascript:void(0)1990s, as a result of the credit crunch - or whether stronger levels of capitalisation in the industry will lead to nothing worse than a little local restructuring.

The headlines of the past weeks and months have focused on banks, primarily in relation to sub-prime lending and derivative products, and the resulting hiatus in the availability of credit. As the case of AIG has shown, though, it would be unwise to regard insurance companies as immune from recent events.

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