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What are Intermediaries?

Mary McMahon
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Updated: May 16, 2024
Views: 19,735
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Intermediaries are third parties who play a role in an agreement or negotiation by helping both sides work together and acting as a go-between. The term “intermediary” is used in a number of different contexts. In the financial world, intermediaries help to broker deals, reach agreements, and make other arrangements which are designed to serve a financial function.

A classic example of an intermediary is a financial adviser. Financial advisers assist clients and help them to buy and sell securities and other financial instruments. The adviser is a neutral third party who does not benefit directly from sales or purchases, being paid for providing advice and assistance. In some regions, the arrangement is slightly different and people who provide financial advice and portfolio management are compensated by percentage, which adds an incentive to work harder on behalf of their clients.

Mortgage brokers and insurance brokers are also examples of intermediaries. For people who need a service, working with an intermediary can speed the time it takes to access that service, while for companies which provide services, an intermediary can save time by prescreening and packaging clients. A mortgage broker, for example, does much of the legwork to determine the kinds of mortgages someone is eligible for and how much money can be borrowed, presenting a bank with a client who is essentially ready to sign on the dotted line.

Using intermediaries provides people with access to experts who have experience and connections. It can be hard to navigate in the financial world when one is not familiar with expectations, norms, and conventions. An intermediary can smooth the way, offering advice and assistance with tasks or taking over to handle things personally, depending on the preferences of the client. The services of these finance industry professionals can also benefit companies which want to sell things, but which would prefer not to interact directly with customers. Through an intermediary, it is possible buy, sell, and exchange without ever meeting the other party or even knowing the other party's name.

Intermediaries are also commonly used in international financial dealings. They are familiar with the workings of the financial system in their own nations and can help investors, institutions, and financial companies get settled, address problems, and handle other matters which may come up. This saves time and money and can make business run more smoothly so that people can concentrate on other matters.

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Mary McMahon
By Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a SmartCapitalMind researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

Discussion Comments
By Charred — On Jul 07, 2011

I know of some businesses that use a fiscal intermediary for their companies. These intermediaries are organizations that handle all the payroll disbursements for the employer, freeing up the employer to focus on the task of running the business.

We have a small business so all of our payroll is done in-house, but I could certainly see where it would be beneficial to have an intermediary. Sometimes it’s hard to keep up with the changes in tax and labor laws and the intermediary can stay on top of these things.

By miriam98 — On Jul 07, 2011

I think that if you use mortgage intermediaries or any other middlemen in your financial dealings, you should ask up front if the broker is getting any kind of kickbacks from selling one product over another.

I suppose that there’s no delicate way to ask this; I realize that many times they are getting a commission of some sort, but I’m referring to whether they have a bias – is one product giving them something more in return?

The reason I say this is that (at least for me) I don’t have all the information at my fingertips to make the best decision on my own. I’m at the mercy of the intermediary, so to speak, and I want his advice to be completely untainted.

Mary McMahon
Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a...

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