Providing services like deposit-taking, loan and investment services, insurance and the redistribution of risk, financial services are the lifeblood that powers economies around the world. When this sector and a country’s economy are strong, people are more confident and spend money. But when the sector falters, it can have devastating consequences.
A robust capital market is a barometer of a healthy economy: it shows that there’s plenty of investor interest and companies have access to funds they need to grow, hire more staff, improve their products and reap even greater profits. Financial services also include services that help people save, and the organisations that manage and regulate them.
The most obvious example is a bank: it’s what you use to keep and spend your money, including the cheques and debit cards you have in your wallet. But there are many more. Insurance firms, for instance, take the risk of insuring you against loss or damage to your property, and earn money from fees and commissions, or by the difference between their lending rates and the interest they charge on deposits. Conglomerates that operate in more than one area of the sector are a common feature, as they offer the benefits of diversification.
Then there are investment and wealth management firms that provide the affluent with advice and strategies tailored to their specific needs. And there are family offices, which handle a single wealthy client or small group of clients.