Financial services are a sector that impacts every aspect of our lives. It’s a massive industry that includes everything from banks to hedge funds to credit unions to small community finance companies and even nonprofits that offer money management advice. “Financial services include everything that touches money,” says Ryan Duitch, president and CEO of payment company Arro.
The financial services industry encompasses the markets, practices and standards that drive a nation’s economy. This is why it’s important to distinguish between financial services and financial goods. A financial good is a physical product, like a mortgage or an insurance policy. A financial service is the activity that supports that product, like an underwriter analyzing risk or the bankers approving your loan application.
There are four major types of financial services: consumer finance, corporate finance, investment banking and asset management. The responsibilities of these industries overlap, but each has its own niche in the market. Consumer finance, for example, is made up of companies that make credit cards and provide personal loans. It also includes the mortgage lenders who provide the actual financing for a home or car purchase.
Corporate finance includes companies that are focused on raising capital and investing in other businesses. Often, these firms are publicly traded, and they are regulated by independent agencies that ensure transparency and fairness.
Asset management is a growing segment of the financial services industry. These companies are responsible for preserving and increasing the value of an organization’s assets, including real estate, equipment and other tangible items. They also manage the investments of clients, such as individuals and companies.