Financial services is a broad term with different meanings depending on who you ask. Some say it refers to the banks, lending organizations, insurance, credit card companies, real estate brokers, etc. Others believe that financial services are the actions delivered by the finance market.
According to the International Monetary Fund, financial services refer to how businesses and consumers acquire financial goods. For example, whenever you make a transaction through a payment system, the provider delivers a financial service when it accepts payment from the sender to the receiver.
Financial services are also not necessarily exclusive to financial transactions. Other services such as investment, insurance, securities, and distribution of financial products can also be classified under financial services. Companies like E2E Financial Solutions play a role in providing essential financial services in loans and financing for small businesses and construction companies.
The financial services sector is the driver of the country’s economy. A strong financial services sector indicates a growing economy and prosperity for the population. Financial services comprise actions taken by individuals, organizations, or companies to ensure that financial markets function as they’re supposed to. Here are some examples of essential services and how they relate to the economy.
Banking stands at the heart of every economy. It deals with savings and lending. Banks provide a safe space for everyone to save their money or borrow more for purposes such as investment, personal use, debt payment, and much more. We receive banking services every day from the community bank, credit union, or any other entity.
Banking as a financial service is a wide field whose purpose is to safeguard the economic welfare of the population. Banks generate revenue by lending money to other parties and charging a higher interest rate than the interests paid to the customer deposits. They also generate income from transaction fees, service/account fees, and forex trade.
Everyone must pay tax once they hit the legal age and start earning an income. Whether you’re an individual armed merely with a stack of receipts and an online tax calculator, or a business outfitted with a whole team of accountants, taxation is a mandatory requirement to support the system and share the burden of service provision with the rest of the population. Taxation can be divided into two categories; individual and business taxation. Under individual taxation, we determine the tax liability, and file returns. On the other hand, taxation for businesses involves small business taxes, corporation tax on profits, and any other fees imposed by the government.
Accounting is a legal requirement for all government entities and a necessity for corporations and other organizations. It examines the books of records, balance sheets, income statements, ledgers, and other accounting records to ensure that they reflect the true and fair view of the company’s financial status.
Accountants are responsible for ensuring that the accounting records fall in line with the accounting principles and federal laws. They’re also responsible for gathering the company’s financial information, which will be used in cost accounting and preparing periodic reports.
Insurance is a type of contract in which an individual/business (the insured party) receives financial coverage against damage or losses against particular events (circumstances) stated in the insurance policy. Various insurance companies offer coverage for businesses and individuals, while others focus on both. Some of the most common insurance policies available include auto insurance, personal insurance, health, and life insurance.
Insurance plays an essential role in the success of the financial sector. By helping businesses, investors, and consumers mitigate risks. Insurance companies bring about a long-lasting impact on the economy.
Insurance companies play an essential role in the economy by pooling together resources to protect their customers against significant losses. This means that as an insured party, you’re only required to pay a smaller amount (premium) for coverage compared to what you would pay on your own.
Wealth management is a collection of activities involving planning, financial and investment advice, retirement planning, legal planning, and much more. It involves managing and investing a customer’s wealth (funds or financial assets) across various financial instruments.
In most cases, wealth management is facilitated by a wealth planner/manager. Wealth planners are similar to financial planners/advisors in that they assess other financial services to manage their clients’ wealth at a fee. They also draft an investment strategy tailored to the client’s goals and create a strategy with minimal risks but yield the most tangible results.
Wealth management is best suited to affluent (high-net-worth) clients. However, individuals may also acquire wealth management services whenever they need to.
To sum it all, financial services are the economic services provided by the finance sector; they involve the activities undertaken in lending, investing, and managing money and assets.
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