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What Is the Structure of Financial Institutions?

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  • Written By: Geri Terzo
  • Edited By: A. Joseph
  • Last Modified Date: 21 September 2018
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    Conjecture Corporation
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Autonomy is something that is inherent throughout the financial services industry. Professionals not only take pride in constructing and performing complex transactions with independence, they also are often compensated based on how much initiative they undertake. Financial services has an entrepreneurial undertone, so the structure of financial institutions is often that of a flat organization. In this environment, although there might be various layers of management, there is not a sense of micro-management that exists toward employees. Organizational structure of financial institutions is another way to examine the way firms operate.

Different layers of seniority are assigned to various titles in a financial firm such as an investment bank. These roles might begin around the associate level and advance to a managing director status or something similar. Graduates are often assigned the entry-level positions but can be rewarded for performance and dedication to a firm over many years. Professionals at any level become inherently responsible for the compensation earned because it is a direct result of performance. This is why a large degree of oversight and over-management is not typically needed, although some measure of accountability is provided.

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The organizational structure of financial institutions varies based on the size of the firm and the business model. An investment bank is one example of a large, institutional firm that has the ability to influence the direction in the markets. These firms might be organized in such a way that there are different business lines contributing to revenues and profits. Investment banking, financial analysis, trading and wealth management are all components of the organizational structure of financial institutions.

Banking divisions at financial institutions generate revenue by performing deals, such as mergers and acquisitions, in the financial markets. There might be many groups of bankers varying in seniority as well as in the industry for which deals are performed. Bankers might participate in deals based on the size of a transaction and relationships with clients, such as corporations and government offices.

Analysts are also part of the structure of financial institutions. Financial analysts issue reports and assign ratings to corporate and regional investment opportunities. Analysts could perform research on behalf of a money management division within a financial organization or for outside clients. A financial institution might also be structured to include a trading division where professional traders buy and sell securities on behalf of clients.

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