Money Matters: What Are the Different Types of Financial Services?
The strength of a nation’s economy is reflected in the strength of its financial services sector. A strong financial services sector can lead to a growth in economic activity.
This growth is due to an increase in the liquidity of new capital. The financial services sector manages this capital. It is made available to both businesses and consumers alike—often in credit and loans.
If capital begins to disappear due to restrictive lending practices, it can decrease economic activity. Businesses may not be able to cover employee wages, and unemployment could result. Thus, in turn, the unemployed or underemployed consumer stops spending.
Thus the importance of the availability of different types of financial services.
Types of Financial Services
It would be impossible to cover every single financial service on offer in today’s economy. However, this company wants to help you understand the most prominent ones.
To better understand how what type of services cater to different economic needs, you need to know what institutions currently exist and why.
1. Banking
Banks are generally known as safe and secure locations for individuals and businesses to store their money. Banks use a lending method called fractional reserve banking to invest their client’s money through loans and credit offerings.
In return, the bank offers its clients a certain amount of interest on the money they store at their location. A great type of retail financial service.
Banks may offer a variety of different services including credit cards, checks, home mortgages, and other loans. Individuals with a high net worth often store their money with private banks that offer additional financial services.
2. Wealth and Investment
Investment firms are a financial service that helps individuals divide money across different investment vehicles. These vehicles may include stocks, bonds, or ETFs. Other alternative investment firms even offer assistance in investing in fine art, wine, and renewable energy shares.
An investment firm will offer you a product to purchase, like a mutual fund, and then help manage that money for your individual gain while collecting a fee for their services.
The investment firm works to minimize the types of risk in financial services that an individual alone may not understand.
3. Insurance
Insurance companies help find the appropriate type of insurance for your specific needs. A quality insurance provider helps design a plan that transfers liability and risk of loss from one party to another. This is done through a predetermined amount of money spent on the plan.
Often, the risk is transferred from a single person to their insurance provider—for example, health insurance. Health insurance transfers medical payment responsibility to your insurance company.
This saves you, the individual, from paying massive out-of-pocket expenses.
Final Words on Types of Financial Services
You can see that the financial services industry encompasses many types of financial services. These services are not limited to the ones listed above. Further research will reveal an even more extensive range of services.
Services that include both consumer and commercial products. Let us know if you enjoyed this article and feel free to take a look at our other articles covering the world of finance today.
