What is the Financial Services Sector?

Globally, the financial services industry leads the world in terms of earnings and equity market capitalization. Large conglomerates dominate this sector but it also includes a diverse range of smaller companies.

Commercial banking services form the foundation of the financial services group. The operations of a commercial bank include the safekeeping of deposits, issuance of credit and debit cards, and the lending of money. An investment bank typically only works with deal makers and high-net-worth clients, not the general public. These banks underwrite deals, secure access to capital markets, offer wealth management and tax advice, advise companies on mergers and acquisitions, and facilitate the buying and selling of stocks and bonds. Financial advisers and discount brokerages also occupy this niche.

Hedge funds, mutual funds and investment partnerships invest money in the financial markets and collect management fees in the process. These organizations require custody services for trading and servicing their portfolios, as well as legal, compliance and marketing advice. There are also software vendors that cater to the investment fund community by developing software applications for portfolio management, client reporting and other back office services.

Private equity funds, venture capital providers and angel investors supply investment capital to companies in exchange for ownership stakes or profit participation. Venture capital was especially important to tech firms in the 1990s. Though fundraising volume was significantly lower in 2006 than it was at the peak of the dot-com bubble in 2000, much of what goes on behind the scenes in the making of big deals is attributed to this group.

Insurance is another important subsector of the financial services industry. In the U.S., an insurance agent differs from a broker. The former is a representative of the insurance carrier, while the latter represents the insured and shops around for insurance policies. This is also the realm of the underwriter, who assesses the risk of insuring clients and also advises investment bankers on loan risk. Finally, reinsurers are in the business of selling insurance to the insurers themselves to help protect them from catastrophic losses.

The vast financial services sector also includes accountants and tax filing services, currency exchange and wire transfer services, and credit card machine services and networks. It also includes debt resolution services and global payment providers such as Visa and MasterCard, as well as exchanges that facilitate stock, derivatives and commodity trades.

read more

Comments

Popular posts from this blog

SG Alliance: Making Your Insurance Nomination

AIA Complete Critical Illness Cover‏

Realisations of a Financial Adviser