Financial Services – The Four Types of Financial Services

Financial services

As we make progress towards financial inclusion, millions of people around the world will benefit from having control over their money. If they’re able to make sound decisions and choose the right products for their needs, they can build savings, invest in the future, have a safety net when unexpected events occur, and be healthy financially throughout their lives. The financial services sector is critical to this vision and can support the growth and success of NYC, our country, and the globe.

Historically, each financial service sector focused on its own specialty: banks provided checking and savings accounts; credit unions offered personal loans; loan associations sold mortgages and auto loans; brokerage companies offered investment opportunities in stocks, bonds and mutual funds; and credit card companies like Visa and MasterCard provided their namesake products. Today, however, the financial services industry is more holistic than ever before. Many of the same professionals can work in several different types of financial services firms. It’s important to understand what makes up the various parts of this industry to decide which roles are the best fit for your skillset.

The four main types of financial services are:

Investment services – This includes hedge fund management, asset management, and wealth advisory services. These services are typically geared toward high-net worth individuals and corporations. Commercial banking – This includes business services, such as issuance of debt and equity to raise capital; deposit-taking; underwriting; and advisory services like mergers and acquisitions. Private equity – This involves purchasing shares of public or private companies to invest the assets. Private wealth management – This type of service handles the financial needs of a family or a small group of wealthy individuals and is similar to private banking.

Insurance – This includes both life and property insurance policies as well as annuities. Insurance companies earn revenue by charging premiums and generating profits from investments and fees. Insurers also offer reinsurance to other insurers to protect them from catastrophic losses.

Lastly, payment services include global payments providers (like wire transfer and currency exchange companies), credit card networks and ATMs, as well as clearing and settlement services to process stock, derivative and commodity trades. These companies play a vital role in the financial services ecosystem, providing the infrastructure necessary for the flow of money and information.