The Financial Services Industry

The financial services industry includes depository institutions, brokers, lenders and more. These firms provide investment and credit products for consumers, small businesses, large corporations and even the government. The sector also encompasses a host of critical financial utilities like insurance, banking and reinsurance.

While it might be tempting to view financial services as a set of goods or products, the term really describes the process by which these goods are acquired. A financial good is something that lasts for a long time, such as a mortgage or an insurance policy, while a financial service is the transaction that leads to its ownership.

Financial services are essential for the economy because they allow people to buy and sell assets and funds, which then facilitates business activity. It is estimated that a third of all global economic activity is tied to financial services. Many families in developing countries depend on financial services to keep their savings safe. Instead of keeping cash in floorboards or under their mattresses, which is easily found and stolen, they can save in a financial institution that offers them the opportunity to earn interest on their savings.

In addition to providing the basics of banking and loans, financial services include private equity and venture capital providers who supply investment funds to companies in exchange for ownership stakes or profit participation. Other services include facilitating payment systems, wealth management and insurance. The latter provides protection against death (life insurance), against property loss or damage (homeowners and auto insurance) and against liability or lawsuit (car insurance). While there are many jobs in financial services, Duitch cautions that not all of them pave the way for future career growth. He advises job seekers to research the sector thoroughly and consider carefully what is important in their careers before making a decision.

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