Financial services are the economic services tied to finance that provide individuals, businesses and other organizations with the means to put their money to productive use. They allow people to borrow to buy homes, cars or education; to invest in stocks and mutual funds; to obtain credit cards and loans from banks; and to exchange money for goods and services. A healthy financial services industry is one of the key pillars of a robust economy.
The industry is in the midst of a major cleaning up effort to make sure that large and small companies operate in ways that benefit their customers or stockholders, rather than just managers. A number of large and small firms have been bought out in recent years, primarily as a result of the financial crisis that began in 2008. Many have also been deregulated as part of efforts to streamline operations. This includes the Gramm-Leach-Bliley Act in the 1990’s that repealed the Glass-Steagall Act, allowing a bank to offer investment, commercial and insurance services; and the removal of restrictions on securities trading in global markets that allowed for automated quotation systems.
Financial services can be divided into sub-sectors such as investment banking, where firms advise investors and provide capital to companies in exchange for ownership stakes or profit participation; private equity and venture capital providers that supply funding for early stage and growth-stage businesses; structured finance which develops intricate products like mortgages and loans for high net worth individuals; and credit card companies. All of these are a vital component to the economy and the financial services sector employs millions of Americans.