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Diversified financial services companies are firms that offer consumers a wide range of different products and services. Historically, financial firms tended to concentrate on offering one type of service, such as lending, investment advice, or insurance. In the past, legal restrictions meant that most firms could not offer a wide variety of services, whereas in recent decades, legislation in many nations has made it easier for financial firms to begin offering diversified financial services.
Banks and other financial firms often train salespeople to become universal bankers. These employees handle all of the financial needs of a particular client. In the past, consumers would have to obtain their loans, insurance, and deposit services from different individuals working at different financial firms. Bankers who offer diversified financial services have to obtain a number of different licenses and pass various certifications that are required in most countries before individuals can sell securities or write loans. Firms that primarily cater to high net worth consumers employ large numbers of universal bankers who can take care of all of their clients' needs.
In addition to training individuals to market different products, many banks and financial firms also offer products that can be tailor-made to the needs of individual clients. Home equity loans and home equity lines of credit are mortgage products that are available with shorter loan terms and lower closing costs than conventional home loans. Many banks market home equity lines as an alternative to credit cards because the collateral attached to a home equity line enables banks to issue these products with higher credit limits than unsecured types of revolving debts.
Based on the premise that clients who have multiple accounts and services provided by one firm are less likely to switch their business elsewhere, banks encourage employees to cross sell insurance products to borrowers. Various types of insurance, including life, homeowners, and credit insurance, are among the diversified financial services banks now offer. Employees typically receive bonuses based on the number of products that are cross-sold to each client.
Many financial companies offer discounts to clients who obtain diversified financial services. Laws in many countries prohibit banks from requiring customers to obtain insurance and other services in order to qualify for loans, but laws do not prevent companies from offering incentives to customers to sign up for other services. In many instances, banks offer packages of services rather than individual types of products. This increases the bank’s profitability and means that every new client may result in four or five new sales of diversified services.