The Financial Services Industry - Sectors and Players
Financial services are the core economic services offered by the financial service industry, which covers a wide array of financial institutions that deal directly with money, such as banks, credit unions, credit card firms, financial planning firms, mortgage companies and so forth. It is the largest financial market in the world, with annual transaction volumes estimated at $1.7 trillion. Finance is divided into investment banking, commercial banking and government financing. Investment banking deals directly with corporate and private wealth. Commercial banking, on the other hand, serves the institutionalized market for creating and guaranteeing loans.
The most popular form of financial services industry offers asset management, financial planning and portfolio management. Asset management includes the process of protecting wealth through the means of insurance or securities. Financial planning provides guidance on how to maximize current savings and capital gains and decide on the best use of financial assets to meet future needs.
Savings accounts are one of the most important financial services industry offerings. They provide people with the means to save and protect their wealth. These savings accounts may be in the form of checking accounts, certificate of deposit (CD) accounts or other secured forms. Savings accounts come in many forms, including term deposits, paycheck deposit, direct deposit, foreign currency deposits, mobile phone deposits, and so forth. Individuals who want to safeguard their investments may also open a self directed IRA account for additional protection.
The financial services industry also includes finance and banking industries. Finance is the field that aids individuals in making important business decisions. Banks are major providers of financial services to small businesses. Many small businesses rely on the banking sector for loans, invoice funding, and general banking needs. Some small businesses actually generate their own income through these banks.
Insurance companies are also an important part of the financial services industry. Insurance companies help individuals and companies to protect their investments and provide a variety of services. Several insurance companies focus primarily on a particular segment of the market, while others offer coverage to a wide range of consumers. Some specialize in commercial, industrial and investment property, while others are general providers of insurance across several different sectors.
Another facet of the financial services industry involves money transfer and debit. Money transfer services help consumers send funds to other consumers, while banks provide the means to withdraw these funds from ATMs and various locations around the world. Money transfer services include electronic transfer of funds to and from consumers' bank accounts and savings accounts.
As previously mentioned, consumers are another important aspect of the financial services industry. Since financial services typically involve consumers, the role of consumers varies across different sectors. For example, some financial services firms focus primarily on providing financial advice and helping consumers create financial goals, while other firms serve as financial advisor and help consumers manage and optimize their financial resources.
Finally, although not an aspect of the financial services industry itself, there are some independent organizations that serve specific sectors of the market. For example, Consumer Advice Institute is an organization that provides unbiased information to consumers about how to improve their financial planning and how to avoid financial mistakes. Consumer Advice Institute does not have a formal contract with any one particular bank or financial advisor, but works in an entirely independent manner. Many independent groups, such as Consumer Federation of America and A.D. Penny, also focus on specific issues or focus on a particular type of bank or financial advisor.
Financial planners, mutual planners, insurance agents, and mortgage brokers are other important players in the financial services industry. Mutual funds, insurance companies, and banks are all sectors that cover different aspects of the market. And though a number of individual practitioners and firms exist in each sector, they often work together to provide more services to consumers, such as providing investment advice, handling money for retirement, or providing mortgage financing.
As you can see, there are many players in the financial services industry, from individual practitioners and firms to large financial institutions like banks and mutual funds. Moreover, there are several different types of players who may not be associated with a particular sector. In this case, it would be more accurate to call these players the "sub-sectors" of the financial services industry. This definition should be considered in light of the current regulatory structure. The most common scenario is for one of the sub-sectors to require an intervention from regulatory authorities in order to serve the consumer.
There are a few exceptions to this rule. For instance, the definition of the financial services industry also includes investment banks, including proprietary investment banks and thrift associations. The definition does not specify that investment banks should be regulated. Mutual funds and insurance companies are also usually not included in this category, even though the majority of investors today use mutual funds to obtain their investment income (passively). This exception is particularly relevant for sub-sectors that do not specialize in securities broking, as the existence of a brokerage firm could mean that the company is providing a more complete service to the consumer.