Q:

What are some examples of financial intermediaries?

A:

Quick Answer

Examples of financial intermediaries include credit unions, financial advisers, insurance companies and mutual funds. A financial intermediary is a financial institution that helps a business or individual save or borrow money.

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Full Answer

There are a few benefits and risks to using a financial intermediary. Specialists look for the best rates when a customer is trying to borrow money, so the customer doesn't have to. Financial intermediaries allow a customer to borrow exactly what he needs, even if it means going through more than one lending institution. They get the best rates possible and the risk is spread over a number of different lending institutions, lowering the risk to the customer.

When searching for a loan, a financial intermediary may decide not to spread the risk over several different lending institutions, increasing the risk for the customer. They may risk a customer's money on poor investment opportunities, and as with any business they are in it to make money, meaning the customer pays fees he may not incur on his own. They rely on liquidity and consumer confidence to do their business and if confidence falls, it may result in a loss for the customer.

Generally, financial intermediaries look out for the interest of their customers, and will match the customer with a lender that will work well for him.

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