The financial services industry encompasses everything from credit cards to insurance, and it’s a large sector that touches all of us. However, it’s not just about big banks and hedge funds; the industry also impacts small community banks and even nonprofit organizations. So what exactly are financial services? The term is often used to refer to every business that involves money. But there are a lot of different types of financial services, and it’s important to understand what these are so you can choose the ones that best suit your needs.
Banking services are the most basic form of financial services, and they include things like handing deposits into checking and savings accounts and lending money. Most people use banking services to pay for things like their electricity bills or to get cash when they need it. Financial services companies handle a lot of the money that moves around our society, and they are responsible for protecting it from theft.
Another type of financial service is investment management. This is where pensions, insurance assets, mutual funds and more are managed. It’s not uncommon for these firms to have a mix of investments in various different sectors, because there’s always the possibility that an asset will become undervalued or overvalued, and it’s up to the firm to figure out how to maximize returns for its clients.
Financial services companies can also provide structured finance and mergers and acquisitions. This can involve taking on debt and equity for private and public entities to raise capital, as well as underwriting and advising on business transactions. These firms are involved in creating more complex products for high-net-worth individuals and businesses that have more intricate needs.
The last type of financial service is insurance, and it includes a wide range of coverage options for individuals and businesses. This can include life and health insurance, as well as property and casualty coverage. Financial services firms are tasked with ensuring that these policies comply with regulatory guidelines, and they’re also responsible for helping individuals and businesses choose the right coverage options.
Until recently, it was common for each segment of the financial services industry to stick to its own niche. Banks mainly offered checking and savings accounts, while loan associations focused on mortgages and personal loans. But starting in the 1970s, consumers began to move away from traditional banks and instead opted for other financial services companies. Today, these companies offer a much more diverse array of options.
Ultimately, financial services are vital for the economy and help support families, businesses and communities. But the industry is also constantly changing, and it’s important for consumers to be aware of the options available so they can make informed decisions.