wiseGEEK: What does a Financial Services Company do?
A financial services company is a business or company which manages, invests, exchanges, or holds money on behalf of clients. Many types of companies can be considered to be in financial services, including banks, insurance companies, and asset management firms, among others. As money and finance become ever more complex, there are an increasing number of activities and enterprises a financial services company can be engaged in.
The largest business in the world, in terms of the amount of money that changes hands, is insurance. It is also one of the oldest businesses. Insurance is considered a financial service because it protects against the loss of money or property, and because insurance companies themselves often are involved very heavily in investment.
The premiums collected by an insurance company are statistically not likely to have to be completely repaid. After a while, an insurance company accumulates more money from premiums than it has had to pay out in claims, and this extra cash is referred to as “float.” It is not uncommon for an insurance company to invest its float in order to earn a return, and thus, in a way, insure themselves.
Banks are another very common type of financial services company. Banks provide many services and products that all
of us have a degree of familiarity with, such as charge accounts, checking, electronic funds transfers, and loans. Many other services are included within the sphere of traditional or “commercial” banking. Investment banks may provide many of these same services, but also manage the assets of their clients in large investment funds .
Foreign exchange is a type of financial service that is often transacted on a small scale, often by small businesses which operate out of airports or heavily traveled port cities. Many commercial banks offer foreign exchange services as well. These consist mainly of trading one currency for another at its market value, minus a commission. Large-scale foreign exchange encompasses the arena in which banks buy and sell substantial amounts of foreign currencies, and it is sometimes engaged in by large investment funds and even some individual traders.
No single financial services company has a very large market share, due to the sheer number of these types of companies in existence. For a financial services company to have a two or three-percent market share is very significant, because most have much less. Indeed, because of the endless niches that this type of company can operate in, market share is not fought for as much as in other industries.Source: www.wisegeek.com
Category: Personal Finance