Financial services are known as the economic services offered by the finance industry.
However, this industry contains a broad range of businesses that handle money including credit unions, banks, insurance companies, stock brokerages, investment funds, and more.
However, there’s a superabundance of prospects in the financial sector for candidates to find the right fit.
So, for anyone considering to begin a career in financial services, they need to get an idea of the industry’s scope to decide which path best suits them and their skills.
Let’s look at the main types of financial services that you can consider for yourself.
1. Banking
Banks are one of the most essential parts of financial services, institutions, and even the capital market.
They are an important component for deposits and lending money to customers.
As per the Federal Deposit Insurance Corporation’s (FDIC) reserve requirement, 10% of the money deposited into banks must stay on hand, whereas the other 90% is available for loans.
Customers receive some part of the interest earned by these loans as they are the ones who deposit their money into the bank.
2. Advisory
This branch of financial services aid both people and organizations with various tasks.
Financial advisors can help with assiduity on investments, provide valuation services for businesses, help in real estate endeavors, and more.
In any case, financial advisors guide people in making the right financial decisions in the capital market.
3. Wealth Management
This service allows people to save money intelligently and receive a return on their investment when possible. If your employer has a 401K program, then it is a type of wealth management.
4. Mutual Funds
This service offers an investment that is shared by multiple parties. These investments are managed by professionals and not the investors themselves.
Mutual funds are quite popular among people that are a little hesitant with their finances as they are a really good buy-in as opposed to conventional investments in bonds, stock, or capital markets.
5. Insurance
Many people are quite familiar with the basic concept and working of insurance.
It is a system in place that you pay monthly or annually to cover the costs of some large expenditures which are often unpredictable.
There are various types of insurance such as health, home, life insurance, and more.
Financial services institution
A financial institution exists to provide different types of deposit, lending, and investment products to individuals, organizations, and more.
Some financial institutions focus on offering services and accounts to the general public.
On the other hand, Some financial institutes such as NCCPL are more likely to serve only certain types of consumers with special offerings.
NCCPL carries a range of products and services which help current and potential investors in effective, efficient, and transparent trading in the Capital Market.
Here are some of the products and services offered by NCCPL:
- Clearing and settlement services
- Investment in government securities
- Risk management systems
- Margin trading system
- Securities lending and borrowing
- Capital gain tax
Role of Financial Institutions
Provides various types of financial services to the customers in the capital market.
- They offer an appealing rate of return to the customers.
- They promote direct investment by the customers and make them understand the risk associated with that as well.
- It helps in forming the liquidity of the stock in case of an emergency in the financial markets.
Features of Financial Institutions
- Offers a high rate of return to the customers who have invested in the financial institution.
- Decreases the cost of financial services provided.
- Crucial for the development of financial services in the country.
- Advises the customers on how to deal with the equity and the other securities bought and sold in the market.
- Aids in improving decision-making because it follows a systematic approach to calculate all the risks and rewards.
To know which financial institution is most appropriate for serving a specific need, it is important to understand the difference between the types of institutions and the purposes they serve.
To work in this industry, you need to research and understand not only the different types of financial services but also the different types of financial services institutions.
Below are just a few kinds of institutions that offer the previous services.
- Commercial Banks (Banking)
- Investment Banks (Wealth management)
- Insurance Companies (Insurance)
- Brokerage Firms (Advisory)
- Planning Firms (Wealth management, Advisory)
- CPA Firms (Wealth management, Advisory)
1. Retail and Commercial Banks (Banking)
Normally, retail banks offered products to consumers while commercial banks worked directly with businesses.
Currently, most of the large banks offer deposit accounts, lending, and limited financial services and advice.
Checking and saving accounts, certificates of deposits (CDs), personal and mortgage loans, credit cards, and business banking accounts are the products offered at retail and commercial banks.
2. Investment banks and companies (Wealth management)
These banks and companies do not take deposits but aid people, businesses and even governments increase capital through the insurance of securities.
Mutual fund companies, also known as investment companies collect funds from people and investors to offer them access to broader securities and capital markets.
Robo-advisors are a perfect example of such companies, supported by mobile technology to support investment services more cost-effectively and provide broader access to investing by the public.
3. Insurance companies (Insurance)
Insurance companies can be defined as financial institutions that help people transfer the risk of loss.
Usually, insurance companies are contacted when people or businesses wish to protect themselves from the financial loss incurred due to death, disability, accidents, property damage, and other misfortunes.
4. Brokerage Corporations (Advisory)
Brokerage corporations aid people and organizations in selling and purchasing securities among investors.
Customers of brokerage firms can place trades of stocks, bonds, mutual funds, exchange-traded funds (ETFs), and some alternative investments.
5. Planning Corporations (Wealth management, Advisory)
A planning corporation is a financial advising institution that helps people set financial goals and plan out a course of action to realize them.
These institutions work for the clients by analyzing their budgets, investments, insurance, and other financial products.
Since they have advanced knowledge of basic and complex financial concepts they play a vital role in today’s world and create plans for their clients.
Advantages and disadvantages of financial institutions
Let’s look at some of the advantages of financial institutions:
- The financial institutions assist in improving the country’s economy.
- Due to the rate of return being higher, it has proved to be more successful in terms of return earned.
- It is also one of the smartest ways to invest money and keep it rotating in the financial and capital market.
- The repayment facility is also very well managed in financial institutions.
- Offers underwriting facilities.
Let’s look at some of the disadvantages of financial institutions:
- The process sometimes becomes complicated for some customers because they try to get involved in different businesses and end up getting confused.
- In case of default done by the management of the financial institutions, the customers will have to face major worse circumstances.
- Customers may not be able to recover the invested amount. The principal amount is not guaranteed because the government announces a certain amount to be repaid.
- Usually, this amount is very less in comparison to the principal amount of the investment made.
Regardless of the disadvantages, financial institutions are still one of the best ways to invest money and to earn good returns from that investment
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