Financial services encompasses a huge range of professionals and products, from big banks and hedge funds to small community-based nonprofits that offer counseling services or money management advice. But there are important distinctions within the industry that you need to understand before you start looking for a job—especially because financial services includes both services and goods.
Historically, the different sectors of the financial services industry stuck to their own specialty. Banks provided a place to hold checking and savings accounts, loan associations offered mortgages and personal loans, brokerage companies gave consumers investment opportunities in stocks, bonds and mutual funds, and credit card companies like Visa and MasterCard provided their name brand credit cards. But with increasing regulation and consumer demand, these sectors began to blend together into the financial services industry as we know it today.
Now, financial institutions collect funds from savers and lend them to borrowers who need capital for things like starting a business or purchasing a home. They earn revenue from fees and commissions as well as the spread of interest rates between loans and deposits.
Regulatory bodies are independent agencies that oversee financial institutions to ensure they are transparent with their clients and are operating fairly. They also establish and enforce regulations to protect consumers’ interests.