Financial services provide a way for individuals to put their money into productive use. Instead of stashing it under their mattresses, consumers can give their savings to intermediaries who might invest in the next great technology or help them buy a house. The industry also provides a range of other services, such as credit-card processing and debt management.
The sector encompasses a wide variety of businesses, including investment banking and brokerage firms, credit-card companies, insurance agencies, and private equity funds. It also includes global payment systems and exchanges that facilitate stock, commodity, and derivative trading. Financial services providers are regulated by governments to ensure transparency and fair treatment of customers. These regulations may require them to report suspicious activity to authorities, implement procedures to prevent money laundering and insider trading, and maintain detailed records of their business transactions.
Some financial services are provided to consumers directly, such as mortgage loans and retail bank accounts. Others are offered through specialized subsidiaries of large financial conglomerates. For example, a private equity fund might provide investment capital to startups in exchange for ownership stakes or profit participation, while an underwriter might offer personal lines of insurance to consumers. Another subsector is family offices, which serve the investment needs of a single wealthy individual or small group of families. These firms are similar to private banks, but they focus on high-net-worth clients and often employ a team of advisors who serve as both brokers and financial consultants.