When most people think of financial services, they tend to focus on the stock market, Wall Street and banking. However, the industry is much more than that and encompasses a variety of other activities that help businesses, individuals, nonprofits and even governments meet their economic goals. It includes credit unions, mortgage lenders, securities brokers and investors, insurance companies and financial advisors. When this sector is healthy, the economy is strong and consumers have more purchasing power. However, if the industry experiences challenges, it can pull down the economy and trigger recessions.
One of the most important aspects of financial services is intermediation. Providers of these services help channel cash from savers to borrowers and redistribute risk. For example, banks accept savings and lend out funds, while also taking on the risk that borrowers won’t repay their loans. Insurance companies offer a similar service by pooling money from many borrowers and paying out claims to those who suffer loss or illness.
Financial services also enable people to invest their wealth in assets such as real estate and companies. These investments, in turn, can generate income for the investor and reduce their risk of financial distress. Additionally, these services make it possible to buy and sell foreign currency and securities as well as to exchange debt for equity.
These activities are critical to a nation’s and world’s economies. Without them, people would have trouble finding those who are willing to borrow money to purchase goods and services, and companies might be too hesitant to expand their operations to new markets because they can’t afford to cover losses. Additionally, a stronger financial services sector can lead to lower interest rates and greater consumer confidence.
Whether you are a professional in this field or just beginning your career, the range of jobs is vast. This can make it difficult to determine your ideal path, especially as many roles require specialized knowledge of a particular area or product. Fortunately, most financial services firms are known for investing in their employees and providing on-the-job training. They are also typically merit-based, meaning if you work hard and demonstrate your aptitude, you will likely be promoted quickly.
Because of the importance of this sector, it’s crucial to stay up-to-date on the latest developments. This can be done by reading trade publications, interacting with colleagues and attending industry events. It’s also a good idea to get involved in community-based organizations that provide financial counseling and other types of support to members of the public. A great place to start is Rocket Money, a company that helps people resolve their debts by negotiating with creditors on their behalf. The company has saved over $245 million for its members so far and continues to grow.