Financial services are the professional firms that help people manage their money, debts and investments. They offer a variety of products and services like checking accounts, savings accounts, credit cards, loans, mortgages and more. Financial services are a vital part of the national economy, and they also play a significant role in individual people’s financial wellbeing. The industry is incredibly complex, and it can be difficult to understand all of the different aspects and roles that make up the sector.
It wasn’t always this way, and in fact, each sector of the financial services industry used to focus on its own area of expertise. For example, banks provided checking and savings accounts, while loan associations provided mortgages and auto loans. Nowadays, however, most financial services companies provide multiple products and services. Even credit card companies, such as Visa and MasterCard, now offer bank accounts and lending services in addition to their payment cards.
This diversity of financial services is made possible by the intermediation of cash and risk. For example, banks help channel cash from savers to borrowers by taking on the risk that borrowers won’t pay back their debt, and they do so by spreading out that risk among many borrowers rather than one or two big borrowers. Insurance companies offer a similar service by pooling cash from many policy holders to cover the costs of a few major losses.
Regulatory agencies are also a key component of the financial services industry. These independent organizations are responsible for overseeing the operations of different financial institutions and ensuring that they act transparently. They also enforce rules and regulations to protect consumers. Two important examples of a regulatory agency are the Financial Industry Regulatory Authority (FINRA) and the Office of the Comptroller of the Currency (OCC).
Another vital aspect of financial services is capital markets, which include everything from stock exchanges to private equity funds. These markets are where investors place their money and receive returns on those investments. The success of these markets depends on the existence of an efficient, well-regulated system that is capable of delivering transparency and minimizing risk.
Technology is continuing to change the way that financial services operate. For example, online banking has changed the way that people access and use their money. Additionally, some companies are now offering debt resolution services, where they negotiate with creditors to allow individuals to settle their debts for less than they owe.
With the wide range of jobs in financial services, it’s important for job seekers to consider their career goals and determine which path is best for them. A common way to enter the field is through a reputable financial institution, such as a bank or credit union, and work your way up to a management role. This allows workers to develop their skills on the job while being exposed to a variety of responsibilities and opportunities. Additionally, it’s often easier for younger financial services professionals to advance in the industry because firms are known for promoting from within and placing a premium on aptitude over tenure.