Financial services encompass a wide range of industries including banking, investment, and insurance. These industries are vital to the health of any economy, funding entrepreneurial ventures, fortifying businesses for domestic and international expansion, managing economic risk, and safeguarding assets against damage or loss.
A healthy financial services sector also allows people to obtain credit cards and loans that allow them to purchase their homes, cars, education, or other items. It also helps them save for retirement, down payments, or other goals and to protect their investments through various insurance offerings.
This industry is unique in that it often provides intermediate services as opposed to consumer goods. For example, an orange can be considered a consumer good, but it is also considered a capital good when it is bought by a deli owner to make juice for his customers. Therefore, the distinction between consumer and capital goods is a key aspect to understand when discussing financial services.
One of the more important recent developments in this industry was the Gramm-Leach-Bliley Act of the 1990s that broke down the Glass-Steagall Act and allowed banks to offer investment, commercial banking, and insurance services all under one umbrella. This paved the way for multi-service financial conglomerates that helped fuel the home buying craze in the United States. Other significant changes that have occurred include deregulation in global markets, an automated quotation system for the stock market, and the emergence of hedge funds. All of these advances have made it possible for investors to access global markets from their home computer and have increased competition among financial service providers.