When you think of financial services, you might envision banking, investing, and insurance. However, this industry actually encompasses everything that touches money in some way. Also called the financial sector, it’s a massive area that can include credit card companies like Visa and Mastercard, debt collection services, global payment networks, and even currency exchanges.
Financial services are essential to a functioning economy, but they can also be a catalyst for economic instability. If the financial sector begins to deteriorate, it can bring down the entire economy, leading to a recession and even a depression. This is why it’s so important that government agencies and financial institutions work to maintain the health of the sector.
The sectors that comprise the financial services industry are diverse and many have distinct roles. Banks, for example, provide depository services by collecting savings and checking account deposits from the public, pooling them, and lending them to borrowers. Credit unions offer a similar service, as well as insurance and investment services. These organizations are regulated by federal and state governments, and they must adhere to certain standards and policies to remain compliant.
Another sector of the financial services industry is composed of brokerage firms and companies that facilitate trading in securities, such as stocks, bonds, mutual funds, shares, options, and other commodities. These entities serve as middlemen between buyers and sellers, and they are compensated through a commission when they complete a trade. The financial services industry is also home to exchanges and clearing houses that provide a central marketplace for buying and selling financial assets.
Financial services also include a number of ancillary businesses, including debt resolution services and credit reporting agencies. These companies, along with accounting and tax filing services, help individuals and businesses manage their finances. In addition, they provide payment and wire transfer services and operate as a medium for transferring stock and commodity market data.
Finally, the financial services industry includes reinsurance companies, which sell reinsurance to reinsurers to cover their liabilities for catastrophic losses. It also comprises asset management companies, which oversee the investment portfolios of individuals and corporations. These firms also offer advisory, intermediation, and research and analysis services.
If you’re thinking about a career in the financial services industry, it is essential to have both hard and soft skills. Although a degree is beneficial for most jobs in this field, the type of education you need varies depending on your specific role. For instance, a lawyer or an accountant may not need a degree to become successful in the field, while a financial analyst might require an MBA.
Regardless of the specific job, financial services careers offer excellent salaries. In addition, positions are usually secure and easier to move up the ladder than other industries. For this reason, it’s important to keep networking in mind, as connections can open a lot of doors in this industry. In addition, this industry is known for its ‘work hard, play hard’ culture, so it’s not uncommon to make lifelong friends in the financial services sector.