The Financial Services Industry
Financial services is a broad term that encompasses a range of businesses that manage money. It includes credit unions, banks, brokerage companies, insurance firms, accountancy companies and some government-sponsored enterprises.
Banking & Securities
Banks are an important part of the financial services industry because they provide consumers with places to save and borrow money. They earn revenue primarily on the spread between interest rates charged for loans and depositors’ deposits.
Brokerage – This is another area of the financial services industry that provides consumers with stock, bond and mutual fund opportunities. These companies also offer customers services such as mortgage and auto loan loans.
Investment & Wealth Management (Family Office)
The financial services industry has changed over the years. Previously, the different sectors of the financial services industry stuck to their own specialties and focused on a few products.
But now, many of the industries are blending together to create larger conglomerates that earn more and offer more to consumers. For example, a bank may buy an insurance company or an investment bank to add to its existing product offerings.
Often, these mergers are made to diversify the financial holding company and to gain the best possible returns on capital. But these changes can sometimes cause problems for the industry. If the financial sector is weakened or doesn’t have enough liquidity to keep the economy moving, it can drag the entire country’s economic engine down. This is called a recession.