Whether you’re saving for retirement or putting money into your children’s education, the financial services industry provides the tools and resources to help you secure your finances. From banks and credit unions to stock brokers, mortgage lenders, insurance companies and debt resolution firms, these institutions offer a variety of products and services that help individuals manage their finances.
A financial good is any asset that can be used to finance a business or investment. The most common examples include cash, checks, stocks, bonds and credit cards. Financial services providers are the entities that facilitate these assets’ flow and use, enabling businesses, governments and individuals to borrow, invest and save with confidence.
What are financial services?
The broadest definition of financial services includes the activities and offerings made by the institutions, advisors, and firms that provide banking, investing, debt management, retirement planning, wealth management, insurance and other related products to consumers, small businesses, large corporations and even sovereign nations. Financial services also encompasses the global payment systems and credit card networks like Visa and Mastercard, as well as financial market utilities such as stock exchanges, clearing houses and commodity, equity and derivatives trader.
Most people have some familiarity with the traditional banking sector of the financial services industry, with services such as checking and savings accounts, money market and mutual funds investments, loans and mortgages. However, the lines that once separated the different sectors of this industry have begun to blur, as many banks now offer a wider array of products than in the past, and other industries once restricted to their niche are now expanding to include additional services.
For example, brokerage firms once only offered investment opportunities in stocks and bonds; now some have added mortgages to their offerings, while others, such as credit card companies, offer both debit and credit cards. The increasing convergence of the different sectors of this industry is likely to continue as consumer demands change and more traditional institutions begin offering new products and services.
Other areas of this industry include private banking, which offers more specialized and exclusive banking services to high net worth individuals; structured finance, which develops intricate (and often derivative) financial products for the purpose of raising capital for mergers or acquisitions; and risk management, which advises on how to minimize investment losses and reduce risks for clients. This sector also comprises a number of auxiliary services, such as debt resolution, foreign currency exchange and wire transfer, and credit card machine services and networks. Lastly, it includes advisory services, which provides guidance to investors and other interested parties on investing and growing their assets. Increasingly, this advice is provided online through blogs and social media platforms.