Financial services involve the making, investment and management of money for individuals and organizations. They can include everything from helping people put money away for a rainy day to trading shares in the stock market.
The main sectors of the financial services industry are banking, insurance and asset management. These sectors handle everything from a bank’s deposits to an individual’s insurance assets and hedge funds.
Banking – This sector includes both retail and commercial banking, which serves individuals and small businesses. It also provides credit and financing to corporations, nonprofits and other organizations.
Deposit-taking and loan services – Banks take your deposits, lend them to other people and charge you interest for the privilege. Some of that money stays on hand in the bank, but most is repaid by the borrower, who pays back the loan plus interest.
Insurance – Insurance is a type of financing that protects people from risk, and is used for many different purposes. It can be life, health, car and property insurance.
Advisory services – Advisors can help with various things, such as advising individuals about their retirement plans, buying stocks and real estate. They can also help with due diligence on investments, valuation services and other things related to the financial world.
The financial services sector is critical to the strength of a country’s economy. When it is strong, consumers earn more and buy more, and the economy grows. When it deteriorates, it can lead to a recession.