Financial Intermediary

AAA

DEFINITION of 'Financial Intermediary'

An entity that acts as the middleman between two parties in a financial transaction. While a commercial bank is a typical financial intermediary, this category also includes other financial institutions such as investment banks, insurance companies, broker-dealers, mutual funds and pension funds. Financial intermediaries offer a number of benefits to the average consumer including safety, liquidity and economies of scale.

INVESTOPEDIA EXPLAINS 'Financial Intermediary'

Financial intermediaries encompass a wide range of entities in terms of size and scale of operation, ranging from a small insurance brokerage, to giant global institutions that provide a complete range of financial services including commercial banking, investment banking and asset management.


In certain areas such as investing, advances in technology threaten to eliminate the (financial) intermediary, a phenomenon known as disintermediation. For example, the advent of online brokerages has resulted in millions of active investors bypassing traditional full-service brokerages and investing directly in the markets. Disintermediation is much less of a threat in other areas of finance such as banking and insurance.

RELATED TERMS
  1. Disintermediary

    Anything that removes the "middleman" (intermediary) in a supply ...
  2. Mutual Fund

    An investment vehicle that is made up of a pool of funds collected ...
  3. Broker-Dealer

    A person or firm in the business of buying and selling securities, ...
  4. Disintermediation

    1. In finance, withdrawal of funds from intermediary financial ...
  5. Central Counterparty Clearing House ...

    An organization that exists in various European countries that ...
  6. Financial Cooperative

    A financial institution that is owned and operated by its members. ...
Related Articles
  1. Analyzing A Bank's Financial Statements
    Fundamental Analysis

    Analyzing A Bank's Financial Statements

  2. Managing Interest Rate Risk
    Options & Futures

    Managing Interest Rate Risk

  3. Savings Accounts Not Always The Best ...
    Options & Futures

    Savings Accounts Not Always The Best ...

  4. Brokers and Online Trading
    Options & Futures

    Brokers and Online Trading

Hot Definitions
  1. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  2. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  3. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  4. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  5. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
  6. Parity Price

    When the price of an asset is directly linked to another price. Examples of parity price are: 1. Convertibles - the price ...
Trading Center