Financial services are the sector of the economy that handles money management and investing. They encompass everything from banking to investment and include such activities as putting away money for a rainy day, trading shares in the stock market and providing mortgages. Often, people think of only investment bankers and hedge fund managers as part of this industry, but it also includes small community banks and nonprofits that provide counseling services to consumers. The financial services industry affects every citizen in one way or another.
There are different types of financial services, but they all involve making, investing and managing money for both individuals and businesses. The main divisions are banks, credit unions, insurance companies and brokerage firms. Banks take deposits of money and pool them so they can be lent out to those who need it. They also offer such services as cashing checks, issuing credit cards and notary services. Investment banks are a separate category from traditional banks and help businesses raise money through mergers and acquisitions, underwriting debt and equity, and restructuring.
The financial services industry is important because it allows people to get the money they need when they need it. Without this, it would be difficult for the primary, secondary and tertiary sectors of the economy to grow and for consumers to purchase goods and services. Additionally, financial institutions enable businesses to disburse funds to different areas of their operation to maximize profit. For example, mutual funds and factoring allow a company to diversify their use of funds while credit card and hire purchase finance allow a business to pay for assets in multiple ways.