Financial services encompass the business activities that handle money and are a critical part of the economy. They include everything from banks and credit unions to insurers and asset managers. They also include the companies that manage pensions, hedge funds and mutual funds, as well as the credit card networks and global payment systems.
One of the most important functions of financial services is helping people save and invest money. Banks make this happen by accepting customer deposits and then lending that money to others, who pay the bank interest for the privilege. Credit cards and mortgages are two types of loans that fall into this category.
Another branch of financial services is investment banking, which focuses on helping individuals and organizations raise capital. It also provides advice on mergers and acquisitions. Investment banking is different from commercial banking, which deals with deposit and loan money.
The third major group of financial services is insurance. This includes a wide range of products that protect against death and injury (life insurance, disability income insurance), property loss or damage (homeowners and car insurance) and other financial losses (e.g., lawsuits and investment losses).
Finally, there are a number of other sub-sectors of financial services, including asset management. This involves managing a client’s assets, such as a stock portfolio or retirement fund. It also includes the activities of financial conglomerates, which combine and diversify the holdings of multiple companies. The fourth and final financial services sector is brokerage, which handles share trading on stock and other exchanges.