Financial services are the companies and professionals that provide advice, investments, loans and other allied products to people and businesses. The financial sector is one of the largest and most important in any economy, and it includes a wide range of activities. This industry covers everything from credit-card companies and investment banks to credit unions and mortgage brokers. It also includes financial technology firms and online trading platforms. There are a number of advantages to working in this field, including the high salaries and job security.
In a typical country, the financial services sector includes central banks and depository institutions; credit unions; commercial and savings banks; merchant banking firms (brokerages and investment bankers); money market funds, mutual fund companies and hedge funds; insurance undertakings and reinsurance companies; and all other financial intermediation and asset management companies. These companies accept deposits and repayments, make loans, issue securities, conduct foreign exchange trading, provide custody, clearing and settlement services for financial assets and negotiable instruments; manage pension and insurance assets, hedge funds and mutual funds; and offer a host of other advisory, research and consultancy services.
These services are important because they allow people to access credit, invest their savings and make purchases that would otherwise be out of their reach. Without these services, it would be difficult for families to build their houses, buy land, acquire livestock or expand their small businesses. In addition, many families save their incomes in financial institutions because it is safer and more convenient than storing cash under their floorboards or in a safe, where it could be stolen.
Another important function of financial services is to help in the development of a country by providing the necessary capital for its growth. This is achieved by ensuring that the primary, secondary and tertiary sectors are adequately funded, which in turn leads to balanced growth and economic prosperity. This is why a vibrant and active capital market is always an indicator of a healthy economy.
In the event of a disaster, these services are also essential in distributing financial aid to those who need it. This will ensure that the country can recover quickly and continue its economic momentum. The industry also protects investors by minimizing their exposure to risk. This is accomplished by limiting their investments to low-risk and liquid assets. It is this aspect that has made the financial industry a critical component of any modern economy.
