Financial services encompass a broad range of businesses and products. They range from banks to credit unions, mortgage brokers and investment firms. They also include debt resolution companies, payment service providers and global exchanges that facilitate stock and derivatives trades. The financial sector is one of the most important aspects of the economy because it enables individuals and businesses to make large purchases and save for future needs. It also provides a vital function by creating economic dynamism and increasing productivity.
Banks are among the most well-known financial services companies and offer checking and savings accounts, money market accounts, mortgages and auto loans. But they weren’t always the all-encompassing financial giants they are today. As consumers shifted their business away from banks in the 1970s, other financial services companies popped up that offered a more diverse array of products and services. By the 1990s, the lines between banking, investments and other financial services began to blur.
Historically, each of these sectors offered their own unique services. Investments included stock and bond trading, mutual funds, equity capital markets, asset management and hedge fund offerings. But the world of financial services is constantly changing, with new regulations and technologies driving innovation and expansion. It’s up to financial services companies to embrace this change and find ways to deliver value for their customers.
The financial services industry is a crucial part of the economy and touches almost everyone’s daily life in some way. It provides the foundation for growth and prosperity and enables people to make big purchases, save for retirement or children’s college tuition, start small businesses and manage their debt. It’s also the backbone for economic stability, by allowing for the free flow of funds and market liquidity and by facilitating mergers and acquisitions.
Insurance is an essential part of financial services and is offered in many forms. Individuals can purchase life insurance, health and property insurance, and credit cards. There are also risk assessment and underwriting services, as well as investment banking and private equity. Corporate finance is another important segment, with the help of which entities can raise capital through mergers and acquisitions or by issuing securities. Structured finance is another area, which involves developing intricate (typically derivative) products for high net worth individuals and institutions with more complex financial needs.
Professional services firms are a sub-sector of the financial sector that includes accounting, tax filing and consulting services. They can also include actuarial services, investment advisory and wealth management. Family offices are investment and wealth management firms that handle the personal finances of wealthy families or groups of individuals. Lastly, there are credit card and factoring services, global payments systems, and credit bureaus.