The Financial Services Industry

When you think about financial services, you probably imagine banks, stock brokers and mortgage lenders. While those are all part of the industry, there is much more to it than that. You also have to consider investment firms, insurance companies and credit card companies. In addition, many nonprofits that offer counseling services or money management advice are considered part of the financial services industry as well.

The primary purpose of financial services is to put savings to productive use. Instead of stashing cash under the mattress, consumers can give it to intermediaries who will invest it in the next great technology or help someone buy a home. This activity is vital to a healthy economy and is usually heavily regulated in order to protect borrowers and lenders.

Some of the most popular financial services include:

Banks – These institutions provide deposit and loan products to individuals, large corporations and small businesses. They can provide everything from checking accounts and credit cards to mortgages and investment advisory services. They can even underwrite debt or equity for businesses looking to grow or takeover other entities.

Brokers – These professionals sell investments like stocks and bonds to individual investors. They can also advise people on buying and selling their own assets. They can even act as a middleman between two parties who want to make a transaction, such as a real estate agent and a mortgage lender.

Investment firms – These are primarily for-profit ventures that manage other people’s money. They can be found on Wall Street or in cities across the country and they make money by charging fees for their services. They can also invest in companies, known as private equity, and can advise on mergers and acquisitions.

Insurance companies – These businesses offer various types of insurance to protect individuals from unforeseen events, such as property damage or health issues. They can also insure financial institutions against losses due to natural calamities.

Some companies that don’t fit into either of these categories still belong to the financial services industry, such as credit rating agencies, such as S&P Global (SPGI), and futures exchanges, such as CME Group (CME). They can be considered a “moat” because they have built large networks that insulate them from competitors and create cost advantages for their customers.

All of these organizations are governed by regulatory bodies, which ensure that they follow laws, treat their customers fairly and have ways to solve complaints. They also have to report suspicious activity to government agencies and conduct thorough background checks on new customers. This keeps the industry free of fraud, money laundering and insider trading. It also helps maintain consumer confidence in the financial services sector as a whole. This is why many people choose to work in this field, as it provides a good career path for those who are willing to work hard and keep their skills up-to-date. The pay isn’t huge, but it can be competitive, and there are often plenty of opportunities to advance based on merit.