You probably think of banks, mortgage lenders and brokers when you think about financial services, but this industry encompasses much more. It includes everything from credit unions to investment management firms. It also covers the companies that provide critical financial utilities, such as wire transfer and credit card processing. It’s an industry that serves not only individuals, but small businesses, large corporations and even the government.
Financial services make the economy work. They channel cash from savers to borrowers and redistribute risk by pooling assets so that individual investors aren’t crippled by bad decisions or unforeseen events. They’re essential to our way of life, and they help us meet basic needs like housing, food and clothing, as well as provide for our futures through education, retirement planning and savings.
The financial sector is made up of thousands of depository institutions, providers of investment products and insurance companies. It also includes a host of support companies, such as accountants and tax filing service providers, money remitters, credit card companies and global payment networks. In addition, it includes debt resolution firms and those that facilitate stock and derivative trades.
Banks are the foundation of financial services, collecting deposits and lending funds to those who need capital for a variety of reasons, from starting a business to buying a car or home. They’re also in the business of evaluating creditworthiness and offering financial advice. And they’re in the business of providing other ancillary services, such as checking accounts, electronic fund transfers and credit card machines.
Investment services are another important component of the finance industry, helping people build wealth by investing in stocks, mutual funds, bonds and other assets. They’re also in the business of asset management, where they manage investment portfolios for their clients based on their goals and risk tolerance. They may also offer advice and counsel to their clients on a range of financial topics, including estate planning, retirement planning, taxes and more.
Finally, financial services offer a wide range of insurance products to protect people from the unexpected. They include property and health insurance as well as life, auto and liability coverage. They’re also in the business of underwriting, where they help private and public entities raise capital by selling debt or equity to investors. They’re also in the business of structured finance, which develops more intricate (and often derivative) products for high net worth individuals and institutions with more complicated financial needs. They may also do mergers and acquisitions, which is when one company buys out another.