You may think of banks, brokers and mortgage lenders as entirely separate entities, but financial services are much more expansive than you might expect. They encompass many different sectors and provide small businesses, large corporations, nonprofits and the government with the capital they need to flourish. Financial services also help with the redistribution of risk, allowing companies to invest in a number of activities that would otherwise be too risky or costly for them to undertake on their own.
The banking industry is the foundation of the financial services sector and focuses on direct saving and lending. The industry earns revenue through interest rates, fees and commissions. Other services like securities trading, investment management, insurance and the redistribution of risk are all part of the financial services sector as well.
As the economy continues to grow and evolve, the need for financial services grows as well. This is particularly true for businesses that need to manage their cash flow. For example, a company that offers software that enables people to track their spending habits could benefit from having access to more money in order to expand its offerings.
Aside from helping companies increase their profitability, the financial services sector also helps with economic development in a country. This can be done by granting loans to struggling industries or by providing investors with a way to invest in startups and small businesses. For example, angel investors are independently wealthy individuals who will often take on the risk of investing in a startup or small business in exchange for a share of ownership and a role on the board.
The financial services industry is regulated by independent agencies that oversee different institutions to ensure transparency and fairness for their clients. These include the Financial Industry Regulatory Authority (FINRA) and the Office of the Comptroller of the Currency. There are also a variety of other regulators in place, such as the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).
Another important component of the financial services industry is asset management. This is where pensions, life insurance assets and even mutual funds are managed. The sector also includes firms that offer advisory and wealth management services, as well as those who specialize in credit card services and debt resolution.
A career in the financial services is not for everyone, as the work can be stressful and demanding. It is not uncommon for those in certain roles to work 16 to 20 hours a day, and it can be difficult to have a good work-life balance. However, those who have the right combination of hard and soft skills can thrive in this industry. In addition, pay in this industry is competitive, and it is not unusual for those who have spent a few years in a specific role to be earning high five figures. For these reasons, it is vital to do your research before choosing a specific career path in the financial services industry.