Financial services

For the Hong Kong constituency, seeFinancial Services (constituency).

Financial servicesareeconomic servicestied tofinanceprovided byfinancial institutions.Financial services encompass a broad range ofservice sectoractivities, especially as concernsfinancial managementandconsumer finance.

Thefinance industryin its most common sense concernscommercial banksthat providemarket liquidity,risk instruments,andbrokeragefor largepublic companiesandmultinational corporationsat amacroeconomic scalethat impactsdomestic politicsandforeign relations.The extragovernmental power and scale of the finance industry remains an ongoing controversy in many industrialized Western economies, as seen in the AmericanOccupy Wall Streetcivil protest movement of 2011.

Styles of financial institution includecredit union,bank,savings and loan association,trust company,building society,brokerage firm,payment processor,many types ofbroker,and somegovernment-sponsored enterprise.

Financial services includeaccountancy,investment banking,investment management,and personalasset management.

Financial products includeinsurance,credit cards,mortgage loans,andpension funds.

Financial Services Authority Seychelles logo on building

History

See also:Global financial system § History of international financial architecture

Change in access to a financial account or services between 2005 and 2014 by country

The term "financial services" became more prevalent in theUnited Statespartly as a result of theGramm–Leach–Bliley Actof the late 1990s, which enabled different types of companies operating in the U.S. financial services industry at that time to merge.

Companies usually have two distinct approaches to this new type of business. One approach would be a bank that simply buys an insurance company or aninvestment bank,keeps the originalbrandsof the acquired firm, and adds theacquisitionto itsholding companysimply to diversify itsearnings.Outside the U.S. (e.g.Japan), non-financial services companies are permitted within the holding company. In this scenario, each company still looks independent and has its own customers, etc. In the other style, a bank would simply create its own insurance division or brokerage division and attempt to sell those products to its own existing customers, with incentives for combining all things with one company.

Relationship to the government

The financial sector is traditionally among those to receive government support in times of widespread economic crisis. Such bailouts, however, enjoy less public support than those for other industries.

Banks

Main article:Bank

Commercial banking services

Main article:Commercial bank

A commercial bank is what is commonly referred to as simply a bank. The term "commercial"is used to distinguish it from aninvestment bank,a type of financial services entity which instead of lending money directly to a business, helps businesses raise money from other firms in the form ofbonds(debt) orshare capital(equity).

The primary operations of commercial banks include:

• Keeping moneysafewhile also allowing withdrawals when needed
• Issuance ofchequebooksso that bills can be paid and other kinds of payments can be delivered by the post
• Providepersonal loans,commercial loans,andmortgage loans(typically loans to purchase a home, property or business)
• Issuance ofcredit cards,processing of credit cardtransactionsand billing
• Issuance ofdebit cardsfor use as a substitute forcheques
• Allow financial transactions at branches or by usingautomatic teller machines(ATMs)
• Provide wire transfers of funds andelectronic fund transfersbetween banks
• Facilitation of standing orders and directdebits,so payments for bills can be made automatically
• Provideoverdraftagreements for the temporary advancement of the bank's own money to meet the monthly spending commitments of a customer in their current account.
• Provideinternet bankingsystem to facilitate customers to view and operate their respective accounts through the internet.
• Provide charge card advances of the bank's own money for customers wishing to settle credit advances monthly.
• Provide a check guaranteed by the bank itself and prepaid by the customer, such as acashier's checkorcertified check.
• Notaryservice for financial and other documents
• Accepting deposits from customers and providing credit facilities to them.
• Sell investment products like mutual funds Etc.

The United States is the largest commercial banking services location.

Investment banking services

Singapore financial district by night (25449263528)

Main article:Investment banking

• Underwritingdebt andequityfor the private andpublic sectorfor such entities to raise capital.
• Mergers and acquisitions– Work to underwrite and advise companies on mergers or takeovers.
• Structured finance– Develop intricate (typically derivative) products for high net worth individuals and institutions with more intricate financial needs.
• Restructuring– Assist in financially reorganizing companies
• Investment management– Management of assets (e.g., real estate) to meet specified investment goals of clients.
• Securities research– Maintain their own department that services to assist their traders, clients and maintain a public stance on specific securities and industries.
• BrokerServices – Buy and sell securities on behalf of their clients (sometimes may involve financial consulting as well).
• Prime brokerage– An exclusive type of bundled broker service specifically meant to service the needs of hedge funds.
• Private banking– Private banks provide banking services exclusively tohigh-net-worth individuals.Many financial services firms require a person or family to have a certain minimum net worth to qualify for private banking service.

New York City and London are the largest centers of investment banking services. NYC is dominated by U.S. domestic business, while in Londoninternational businessand commerce make up a significant portion of investment banking activity.

Foreign exchange services

Foreign exchange machine

FX or Foreign exchange services are provided by many banks and specialistsforeign exchange brokersaround the world. Foreign exchange services include:

• Currency exchange– where clients can purchase and sell foreign currency banknotes.
• Wire transfer– where clients can send funds to international banks abroad.
• Remittance– where clients that are migrant workers send money back to their home country.

London handled 36.7% ofglobal currencytransactions in 2009– an average daily turnover ofUS$1.85 trillion – with more US dollars traded in London than New York, and moreEurostraded than in every other city in Europe combined.

Investment services

• Collective investment fund– A fund that acts as an investment pool so investors can put money into a fund that will reinvest it into a variety of securities based upon their common, outlined investment goal.
• Investment Advisory Offices – Run by registered investment advisors who advise clients in financial planning and invest their money.
• Hedge fund management– Hedge funds often employ the services of "prime brokerage"divisions at major investment banks to execute their trades.
• Private equity– Private equity funds are typically closed-end funds, which usually take controlling equity stakes in businesses that are either private or taken private once acquired. Private equity funds often use leveraged buyouts (LBOs) to acquire the firms in which they invest. The most successful private equity funds can generate returns significantly higher than provided by the equity markets.
• Venture capital– Private equity capital typically provided by professional, outside investors to new, high-growth-potential companies in the interest of taking the company to an IPO or trade sale of the business. Startup companies are typically fueled by anangel investor.
• Family office– Investment and wealth management firm that handles a wealthy family or small group of wealthy individuals with financial plans tailored to their needs. Similar toprivate banking.
• Advisory services – These firms (or departments within a larger entity) service clients withfinancial adviserswho serve as both, a broker as well as a financial consultant.
• Custody services– the safe-keeping and processing of the world's securities trades and servicing the associated portfolios. Assets under custody in the world are approximately US$100 trillion.

New York City is the largest center of investment services, followed by London.

Insurance

Main article:Insurance

National Insurance Services (NIS) – St. Vincent ^ the Grenadines – panoramio

• Insurance brokerage –Insurance brokersshop for insurance (generally corporate property and casualty insurance) on behalf of customers. Recently several websites have been created to give consumers basic price comparisons for services such as insurance, causing controversy within the industry.
• Insurance underwriting – Personal lines insuranceunderwritersactually underwrite insurance for individuals, a service still offered primarily through agents,insurance brokers,andstock brokers.Underwriters may also offer similar commercial lines of coverage for businesses. Activities include insurance andannuities,life insurance,retirement insurance,health insurance,andproperty insuranceandcasualty insurance.
• Finance and insurance – a service still offered primarily at asset dealerships. The F&I manager encompasses the financing and insuring of the asset which is sold by the dealer. F&I is often called "the second gross" in dealerships that have adopted the model
• Reinsurance– Reinsurance is insurance sold to insurers themselves, to protect them from catastrophic losses.

The United States, followed by Japan and the United Kingdom are the largest insurance markets in the world.

Other financial services

• Angel investment networks – A group ofangel investorscan create their own network to be the financial foundation for future companies.
• Credit card networking – Companies that serve as the bridge between the retailers and the banks who issue the bank cards. Major credit card networks are:UnionPay,Mastercard,Visa Inc.,Rupay,American ExpressandDiscover Financial.
• Market Maker- Company that quotes both buy and sell prices in tradable assets in order to create liquidity within the marketplace. Ex. beingCitadel SecuritiesandFlow Traders.
• Proprietary tradingfirms - Not always, but frequently overlapping as market makers, these firms trade a variety of financial instruments with the firms own money to profit for itself (unlike hedge funds, whom use clients money to invest). Ex.Jane Street CapitalandJump Trading.
• Conglomerates– A financial services company, such as auniversal bank,that is active in more than one sector of the financial services market e.g. life insurance, general insurance, health insurance, asset management,retail banking,wholesale banking, investment banking, etc. A key rationale for the existence of such businesses is the existence of diversification benefits that are present when different types of businesses are aggregated. As a consequence,economic capitalfor a conglomerate is usually substantially less thaneconomic capitalis for the sum of its parts.
• Debt resolution– A consumer service that assists individuals that have too much debt to pay off as requested, but do not want to file bankruptcy and wish to pay off their debts owed. This debt can be accrued in various ways including but not limited to personal loans, credit cards, or in some cases merchant accounts.
• Financial market utilities – Organizations that are part of the infrastructure of financial services, such asstock exchanges,clearing houses,derivative and commodityexchangesandpayment systemssuch asreal-time gross settlementsystems orinterbank networks.
• Payment recovery – Assistance in recovering money inadvertently paid to vendors by businesses, such as by accidental duplicate payment of an invoice or failure to return a deposit.

Financial exports

A financial export is a financial service provided by a domestic firm (regardless of ownership) to a foreign firm or individual. While financial services such as banking, insurance, and investment management are often seen as domestic services, an increasing proportion of financial services are now being handled abroad, in otherfinancial centres,for a variety of reasons. Some smaller financial centres, such asBermuda,Luxembourg,and theCayman Islands,lack sufficient size for a domestic financial services sector and have developed a role providing services to non-residents asoffshore financial centres.The increasing competitiveness of financial services has meant that some countries, such as Japan, which were once self-sufficient, have increasingly imported financial services.

The leading financial exporter, in terms of exports less imports, is theUnited Kingdom,which had $95 billion of financial exports in 2014.The UK's position is helped by both unique institutions (such asLloyd's of Londonfor insurance, theBaltic Exchangefor shipping etc.)and an environment that attracts foreign firms;many international corporations have global or regional headquarters in theLondonand are listed on theLondon Stock Exchange,and many banks and other financial institutions operate there or inEdinburgh.

See also

• Alternative financial services
• Financial analyst
• Financial crime
• Financial accounting
• Financial technology
• Financialization
• Insider threat
• International Monetary Fund
• List of countries by share of population with access to financial services
• List of largest financial services companies by revenue
• Payment card industry
• Valuation (finance) § Valuing financial services firms

Further reading

• Porteous, Bruce T.; Pradip Tapadar (December 2005).Economic Capital and Financial Risk Management for Financial Services Firms and Conglomerates.Palgrave Macmillan.ISBN1-4039-3608-0.

External links

• The role of the Financial Services Sector in Expanding Economic Opportunity | A report by Christopher N. Sutton and Beth Jenkins | John F. Kennedy School of Government | Harvard University