Financial institutions provide their clients with expertise and advice to help them on their path to a sound financial future. But where does a financial institution go when it needs advice itself? That's where a FIG—or a financial institutions group—comes into the picture. So what exactly is a FIG and what does it do?
Below, we explain what a FIG is and how it works in the financial services industry.
What Is a FIG?
A FIG refers to a financial institutions group. This group is made up of professionals who provide expertise and advisory services to their clients. These clients are typically financial institutions which include banks, insurance companies, technology companies, specialty finance, and asset management firms.
Investment banks and their FIG businesses typically hire analysts with Ivy League credentials. Many investment banks also have training programs which help educate analysts on the important aspects of the business’s offerings with a multitude of opportunities available after the training program ends.
Who Are FIGs and What Do They Do?
In order to provide more tailored services, some investment banks may segment areas of expertise for the financial institution's group into a banking or financial services group and an insurance group. Some investment banks use these sorts of divisions more as a marketing technique which can help attract customers seeking specific types of services under the FIG umbrella.
Nearly all of the large banks have a FIG business integrated with their overall investment banking offering. Some of the larger investment banks with a FIG business include Morgan Stanley and Goldman Sachs.
The services that FIGs provide for their clients can vary. These services may include:
The FIG business can represent a variety of clients seeking services ranging from initial public offerings (IPOs) to financings and buyouts. FIG businesses can represent both public and private companies. Investment banking FIG businesses may offer specific expertise in certain market segments or have specialists that can work across many segments.
Generally, large FIG businesses will service a variety of needs for financial institutions. FIGs may be siloed or integrated with broad services for all the major sectors including healthcare, industrial, media, telecommunications, mining, energy, retail, technology, and real estate.
According to its website, Goldman Sachs's FIG group has about 300 specialists in Latin America, China, and Central Europe who provide a variety of advisory services including M&A, equity and debt financing.
How do FIGs Make Money?
FIG business structures can range broadly across the industry. Some FIG business may be located within a large investment bank culture. Some FIG businesses may be smaller entities with a focus primarily on one of the above-mentioned service offerings.
FIGs don't make money the traditional way, so they don't necessarily sell physical products. A lot of the profits they make are derived from borrowing money at cheap rates and then selling it at a higher cost. So they make money through interest income by moving money around in money markets, through loans, and other deposits.
Some examples of ideal FIG clients include insurance companies specializing in personal or commercial products; commercial finance companies that provide financial services to businesses, banks, brokerages, investment dealers, asset and wealth management companies; emerging companies seeking to go public; and private companies seeking financing through a private placement.