Financial Services Sector
The economy is made up of many different segments called sectors. These sectors are comprised of different businesses that provide goods and services to consumers. The companies that are grouped together in a sector provide a similar product or service. For instance, companies that offer agricultural services make up the agricultural sector. Corporations that provide mobile or cellular telephone services are part of telecommunications sector. This article looks at the financial services sector, one of the most important segments of the economy.
The banking industry is the foundation of the financial services group. It is most concerned with direct saving and lending, while the financial services sector incorporates investments, insurance, the redistribution of risk, and other financial activities. Banking services are provided by large commercial banks, community banks, credit unions, and other entities.
Individuals may access financial markets like stocks and bonds through investment services. Brokers—either human or self-directed online services—facilitate the buying and selling of securities, taking a commission for their efforts. Financial advisors may charge an annual fee based on assets under management (AUM) and direct several trades in the pursuit of constructing and managing a well-diversified portfolio. Robo-advisors are the latest incarnation of financial advice and portfolio management, with fully-automated algorithmic portfolio allocations and trade executions.
Insurance is another important subsector of the financial services industry. Insurance services are available for protection against death or injury (e.g. life insurance, disability income insurance, health insurance) against property loss or damage (e.g. homeowners insurance, car insurance) or against liability or lawsuit.
Tax and Accounting Services
The sector also includes accountants and tax filing services, currency exchange and wire transfer services, and credit card machine services and networks. It also includes debt resolution services and global payment providers such as Visa and Mastercard, as well as exchanges that facilitate stock, derivatives, and commodity trades.
Accountants ensure all financial records and statements—the balance sheet, income and loss statement, cash-flow statement, and tax return—are in line with federal laws and regulations and generally accepted accounting principles (GAAP).