9 9.

1
SPECIALIZED BANK
SERVICES
International Banking
9.2 Insurance and Brokerage
9.3 Cash Management
9.4 Trusts

Slide 1
 Lesson 9.1
INTERNATIONAL
BANKING
GOALS
Identify three types of financial institutions
engaged in international banking
Describe international services offered by
banks

Slide 2
STRUCTURE
STRUCTURE OF
OF INTERNATIONAL
INTERNATIONAL SERVICES
SERVICES

 Foreign banks
 U.S.-based international banking
 Other types of international operations
 Special considerations
 Financial risk – hard to get reliable information
 Currency risk – Value of currency can fluctuate
 Country risk – political, social, legal and economic
conditions

Slide 3
INTERNATIONAL
INTERNATIONAL SERVICES
SERVICES

 Trade financing
 Letters of credit – Letter given by bank on behalf of
buyer
 Drafts and wires – Similar to a check, order given
from one party to another
 International collections -
 Foreign currency exchange – Must exchange money
to do business in another country

Slide 4
INTERNATIONAL
INTERNATIONAL SERVICES
SERVICES -- continued
continued

 Trade consulting
 U.S. export-import (Ex-Im) bank
 Overseas private investment corporation (OPIC)
 Small business administration (SBA)

Slide 5
 Lesson 9.2
INSURANCE AND
BROKERAGE
GOALS
Explain the effects of the Gramm-Leach-
Bliley Act of 1999
List typical insurance and brokerage
products available from financial
institutions

Slide 6
A
A NEW
NEW ERA
ERA

 The old world: Glass-Steagall Act: Response to the

Great Depression, Banks could not own brokerage firms. Banks
could no longer compete with other financial services
 The new world: Gramm-Leach-Bliley ACT
(GLBA) Banks could now could pursue insurance and
securities businesses. Consumers can prohibit sharing of private
information to third party. (opt-out)
 Limits and regulation: State laws concerning banks are
accountable to the nation. Prevents states from making laws that
can be detrimental to the interest of the nation

Slide 7
PERSONAL
PERSONAL INSURANCE
INSURANCE PRODUCTS
PRODUCTS

 Auto insurance
 Credit insurance
 Disability insurance
 Life insurance
 Health insurance
 Homeowner’s insurance
 Mortgage disability insurance

Slide 8
BUSINESS
BUSINESS INSURANCE
INSURANCE

 Commercial liability
 Short-term disability
 Long-term disability
 Health insurance
 Officers’ liability
 Property
 Workers’ compensation

Slide 9
BROKERAGE
BROKERAGE SERVICES
SERVICES

 Brokerage refers to bringing together parties

interested in making a transaction, such as
buying and selling shares of stock.
 A broker charges a fee to execute the
transaction.
 Banks now offer full investment services.

Slide 10
 Lesson 9.3
CASH MANAGEMENT
GOALS
Explain why banks are in a good position to
offer cash management services
List several cash management services
banks perform for businesses

Slide 11
SYSTEM
SYSTEM IN
IN PLACE
PLACE FOR
FOR CASH
CASH MANAGEMENT
MANAGEMENT

 Every business needs to disburse and collect

cash to complete business transactions.
 Banks are in a good position to provide cash
management services to businesses for a
number of reasons.
 Experience
 Business knowledge
 Technology
 Industry expertise
Slide 12
CASH
CASH MANAGEMENT
MANAGEMENT

 Accounting services
 Bank collection services
 Information services
 Capital services

Slide 13
ACCOUNTING
ACCOUNTING SERVICES
SERVICES

 Payroll: All functions of payroll are managed

 Accounts payable: Short term debt usually 60 days or less
 Accounts receivable: services or merchandise sold on
credit collected by bank

Slide 14
BANK
BANK COLLECTION
COLLECTION SERVICES
SERVICES

 Deposit service: Customers can make deposits in various

ways (maximize balance in interest-bearing account)
 Lockbox service: Accounts receivable are deposited
directly to bank (accelerating the conversion of receivables into
usable cash)
 Zero-balance accounts: Accounts are reconciled daily
(central account)
 Automated Clearing House (ACH) Network: Highly
efficient electronic banking system

Slide 15
INFORMATION
INFORMATION SERVICES
SERVICES

 Electronic Data Interchange (EDI)

 Computer-to-computer exchange of business
information
 Banks can advise and provide services

Slide 16
CAPITAL
CAPITAL SERVICES
SERVICES

 Capital investments: Expenses incurred for business use,

example: printing press, fleet of trucks
 Financing: Advise clients on how to keep debt-to-equity ratio
low
 Factoring: Buying debt at a discount

Slide 17
 Lesson 9.4
TRUSTS
GOALS
Explain what trust services are
Identify important types of trust services
banks provide

Slide 18
WHAT
WHAT ARE
ARE TRUST
TRUST SERVICES?
SERVICES?

 A trust is an arrangement by which one party

holds property on behalf of another party for
certain defined purposes.
 The donor, or settlor, is the person who creates
a trust.
 The beneficiary is the person for whose benefit
the property is held.
 Corpus, or res, refers to the property that is held.

Slide 19
TRUST
TRUST SERVICE
SERVICE PRODUCTS
PRODUCTS

 Retirement planning: IRA (individual retirement account),

variable annuity
 Estate planning: Family arranges transfer of
assets
 Estate settlement: Value, taxes, filing, distribution of
assests
 Testamentary trust: Estate is managed for the heirs
 Charitable remainder trust: Money given to charity
 Living trust: Setting up while a person is living. Describes
transfer of property.

Slide 20
RETIREMENT
RETIREMENT PLANNING
PLANNING

 IRA: Great way to save for retirement.

 Regular IRA: Money taxed when withdrawn
 Roth IRA: Money taxed at time of investment

 401(k) plan: Employees retirement account

 Variable annuity: Similar to regular IRA only more flexible.
Tax deferred growth

Slide 21
ESTATE
ESTATE PLANNING
PLANNING

 Estate planning is the process by which an individual or family

arranges the transfer of assets in anticipation of death.
 An estate is the total property, real and personal, that an
individual owns.
 The cornerstone of any estate plan is a will, a document by
which the individual gives instructions as to what is to happen
upon his or her death in regard to property and remains.
 Probate is a court proceeding that settles an estate’s final debts
and formally passes legal title to property from the decedent to
his or her heirs.

Slide 22
ESTATE
ESTATE SETTLEMENT
SETTLEMENT

 Identifying and valuing the estate assets

 Paying creditors, estate expenses, and taxes
 Preparing and filing the necessary tax
documents with federal and/or state authorities
 Distributing assets to beneficiaries

Slide 23
TESTAMENTARY
TESTAMENTARY TRUST
TRUST

 Testamentary trusts are established by a will

and take effect at the donor’s death.
 They receive the assets of the estate to hold and
manage for the benefit of the heirs.

Slide 24
CHARITABLE
CHARITABLE REMAINDER
REMAINDER TRUST
TRUST

A charitable remainder trust (CRT) is an irrevocable

trust designed to convert the highly appreciated
assets of a trustor into a lifetime income stream
without generating estate and capital gains taxes.

Slide 25
LIVING
LIVING TRUST
TRUST

A living trust is a legal document that provides an

expedient way to transfer property at a person’s
death.

Slide 26
Slide 27
PERSONAL
PERSONAL FINANCIAL
FINANCIAL PLANNING
PLANNING

 Learning objectives
- Explaining the need for financial planning services
- Describe the financial planning tools and process
- Identify the insurance, investment, and trust
products banks offer
- Identify retirement plan considerations and
products

Slide 28
Banks
Banks and
and financial
financial planning
planning
 Financial planning goals
Financial planning is the drafting and
implementation of a plan to achieve specified
financial objectives.
The goal is to maximize income and minimize
expenses to obtain short-term and long – term
objectives.
Time value of money and risk management
considerations

Slide 29
The
The risk
risk pyramid
pyramid

Slide 30
Financial
Financial planning
planning goals
goals

 Goals need to be set:

- Cope with current demands
- Protect against personal risks
- Set aside funds for emergencies, education, and
investments
- Prepare for retirement
- Minimize taxes
- Provide for heirs
Slide 31
Financing
Financing planning
planning process
process

 Customer life stages

- Young adults
- Working adults with young children
- Empty Nesters

Slide 32
Financing
Financing planning
planning process
process

 Financial planning steps

- Determine customer’s needs
- Prepare a net worth statement
- Identify short-medium, long-term goals
- Prepare a cash flow strategy
- Draw up a full plan
- Put the plan into action

Slide 33
Financial
Financial services
services products
products

 By providing a mix of savings, insurance, and

investment products, banks help consumers
achieve their investment goals (maintaining
liquidity, preserving capital, minimizing risk, or
generating income)
 Safe assets (low risk); Income and growth
assets (moderate risk); Speculative assets
(greatest risk and highest return)

Slide 34
Net
Net worth
worth statement
statement

Total assets (owned) – Liabilities (owed) = Net Worth

Exhibit 8.2 Net worth worksheet (page 62)

Slide 35
Net
Net Income
Income

Exhibit 8.3 Page 64

Slide 36
Cash
Cash flow
flow strategy
strategy

 Insurance protection
- Life insurance
- Health, disability, and long – term care insurance
- Property, Title, and vehicle insurance
- Liability insurance

Slide 37
Cash
Cash flow
flow strategy
strategy

 Investment strategies (Conservative,

aggressive, speculative)
- Stocks
- Bonds
- Mutual funds
- Annuities

Slide 38
Retirement
Retirement planning
planning

 Estate planning

Slide 39