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Financial institutions and professional financial advisers offer a host of investment services that are focused
on helping their clients meet predetermined financial goals. These investment services may be customized to a
client’s income levels, circumstances and objectives and focus on wealth creation and protection. Investment
services include making, organizing and managing investments and may also encompass financial planning,
accounting, life insurance and tax planning.
Types of Investment Services
Prior to the late 1990s, US commercial banks were forbidden by law to offer investment services. The Gramm-
Leach-Bliley Act of 1999 made it legal for a bank to offer both commercial and investment services. Over the
years, the distinction between commercial and investment banks has blurred. The types of investment services
offered by banks include:
# Money management: The first step for any investor is to ascertain the amount of money he has at his disposal
for investing and the various financial options available to maximize returns and tax rebates and minimize risks.
While this is true, the cards can come with plenty of their own fees, a prospect that worries some people like
Jean Ann Fox, director of financial services for Consumer Federation of America. While the initial purchase price
of the card is often borne by the employer, workers may be subject to fees when they withdraw cash at an ATM,
make a purchase in a store, call to check their balance, request a paper statement or need a card replaced if
it's been lost or stolen.
Prior to the passage of the Overdraft Act this July, some cards would even let users overdraw and incur hefty
fees, which is like extending a short-term loan -- at a payday loan prices. Given that these cards are
specifically targeted to workers who are financially unsophisticated, this could add up to a whole lot of
trouble.
A big part of the problem is the relative lack of regulation around prepaid and reloadable debit cards. "Our
position is that they're legally nebulous," says Angie Wei, legislative director of the California Labor
Federation. "There's no oversight or regulatory framework."
California has better laws than many states when it comes to payroll cards, but Wei says that the lack of a
national framework to regulate these cards puts cardholders at risk of falling through the cracks. This legal
gray area is troubling to many consumer advocates, who point out two main trouble spots with the cards.
First, there aren't many limits on the types of fees and the amounts of those fees that a card issuer can charge
the user. A total of 11 states have laws on the books saying that a worker has to have the right to access their
pay without paying a fee, so most payroll cards permit one free withdrawal per pay period. If the cardholder
doesn't have a bank account, though, this isn't really practical; they'd be in the same unsafe situation --
carrying around piles of cash -- that you'd imagine they got the card to avoid. In reality, using the card can
cost the worker his or her hard-earned money. Even Howe acknowledges, "Some of the programs out there even today
are very expensive for the worker."
A potentially bigger problem has to do with FDIC insurance. Under FDIC rules, if you have a bank account with
less than $250,000 in it and the bank fails, you get your money back. If an entire company's worth of payroll
deposits are lumped into a single account, though, there's no legal guarantee that all the money would be
returned to its rightful owners if the bank goes bankrupt.
Sean Panizzi, branch manager at Teamtemps Personnel Staffing in Valdosta, Ga., says payroll cards were a
lifesaver at his business, which employs around 700 temporary staffers who work for clients in several
Southeastern states. Paper checks got lost in the mail or were sent to the wrong addresses, and they sometimes
needed to be canceled, reissued and overnighted -- at considerable expense -- when a client submitted the temp
worker's hours incorrectly. About a year ago, Teamtemps started offering the Global Cash Card, issued by
MasterCard, to workers who didn't opt for direct deposit. Panizzi says that workers loved the option, so much so
that about 50% of them now opt for the cards.
Panizzi's company did a few things right when it started issuing payroll cards, according to the consumer
advocates we consulted. First, Teamtemps scouted out a card that even those without access to a bank could use
without paying hefty fees. This was a crucial step in picking a card provider, Panizzi says, since the company
has many employees in rural areas who would need to rely on ATMs to access their cash. (One problem with both
prepaid and reloadable debit cards is that there can be high fees for users who want to withdraw cash.) Teamtemps
also got information about the card translated into Spanish so workers who didn't have English as a primary
language wouldn't struggle to understand how the card worked.
Another card benefit? Howe says that they're much cheaper for employers to administer than the paper checks they
replace. In addition, for those Americans who are part of what watchdog groups dub the "unbanked," they can be a
less-expensive option. "We were focused on the workforce that didn't or couldn't get a bank account," Howe says
of his days at Directo. "This lets get them out of the world of check-cashing fees."
While this is true, the cards can come with plenty of their own fees, a prospect that worries some people like
Jean Ann Fox, director of financial services for Consumer Federation of America. While the initial purchase price
of the card is often borne by the employer, workers may be subject to fees when they withdraw cash at an ATM,
make a purchase in a store, call to check their balance, request a paper statement or need a card replaced if
it's been lost or stolen.
Prior to the passage of the Overdraft Act this July, some cards would even let users overdraw and incur hefty
fees, which is like extending a short-term loan -- at a payday loan prices. Given that these cards are
specifically targeted to workers who are financially unsophisticated, this could add up to a whole lot of
trouble.
A big part of the problem is the relative lack of regulation around prepaid and reloadable debit cards. "Our
position is that they're legally nebulous," says Angie Wei, legislative director of the California Labor
Federation. "There's no oversight or regulatory framework."
# Portfolio management services: These services are aimed at investors achieving the right mix of investments,
such as stocks, bonds, commodities, derivatives and CDs, depending upon their financial goals and risk appetite.
Portfolio management encompasses making a choice between equity and debt, domestic and international investments
as well as growth and safety.
# Retirement planning services: Once the retirement goals have been laid down, appropriate investments need to be
made into pension plans, 401(k) plans and profit sharing plans. One may also need to invest into the financial
and money markets to ensure a steady stream of income post retirement.
# Collective investment portfolio management: Banks offer advice on collective investments, such as mutual funds,
ETFs and managed funds. One may also need professional advice for investing in hedge funds. Such funds hedge
their risks via methods like short selling.
# Brokerage services: Investors need brokers to trade in bonds, stocks, foreign currency and derivatives. The
brokerage services offered by banks are considered more reliable and are preferred to those offered by individual
brokers.
Apart from financial goals, investors may have other priorities that financial institutions providing investment
services can take into account. Such priorities may include socially responsible investing, green investing and
sustainable investing.Download link