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Financial services is a term used to refer to the Service s provided by the '''finance industry'''. Financial services is also the term used to describe organizations that deal with the management of money and includes Merchant Bank s, Credit Card companies, consumer finance companies, Government Sponsored Enterprise s, and Stock Broker ages. Financial services is the largest Industry (or industry category) in the world, in terms of earnings; as of 2004 , the industry represents 20% of the Market Capitalization of the S&P 500 . Contrary Investor HISTORY OF FINANCIAL SERVICES United States: Gramm-Leach-Bliley Act The term ''financial services'' became more prevalent in the United States partly as a result of the Gramm-Leach-Bliley Act of the late 1980s , which enabled different types of companies in the US financial services industry to merge. Critics of this act say the term ''financial services'' attempts to make the unison of these operations sound natural, ignoring the history of problems that have arisen from combining them, such as Conflicts Of Interest and Monopolization . Others, noting that many of the restrictions abolished by the Gramm-Leach-Bliley Act had never existed in other countries or had been abolished earlier than in the US, say the term ''financial services'' is a natural one, in long term use, which means nothing more than its constituent words .
JP Morgan Chase . In the other style, a bank would simply create its own brokerage division or insurance division and attempt to sell those products to its own existing customers, with incentives for combining all things with one company. This is the style of Washington Mutual and Wells Fargo . BANKING SERVICES: ''WHAT DO BANKS DO?'' See Also: Bank The primary operations of banks include:
Virtual banking Banking from home is called '' Virtual Banking '', because it allows transactions that bypass branches and ATMs; in the case of Internet banking, there is no need to contact a bank staff member. Virtual banking has changed the way people bank in many ways. In the past, people opened a bank account when they first started work and stayed with that bank for their whole lives; now, it is much easier to move an account, mortgage or loan from one banking institution to another. Many customers look at what other banks are offering and change their account if they find a better deal, so banks now have fewer loyal customers. It is common for credit card companies to entice new customers with offers such as zero per cent interest for the first six months. COMMERCIAL BANK A '' Commercial Bank '' is what is commonly considered a 'bank'. The term ' Commercial ' is used to distinguish it from an 'investment bank', a type of financial services entity which, instead of lending money directly to a business, helps businesses raise money from other firms in the form of Bonds (debt) or Stock (equity). Major commercial banks include: Top ten banking groups in the world ranked by Tier 1 Capital Top ten banks in the world (as at end-2006) according to The Economist : The Economist: The world's biggest banks , List of the world's ten largest banks by tier 1 capital at the end of 2006 Private banking The term ''private bank'' is simply a marketing term for a bank or a division of a financial services company targeted towards wealthy individuals. Often it is used to describe specifically the lending services targeted towards this group, such as large margin loans. This table displays the results of the Ultra high net worth ( US$ 30m+) category of the 2006 private banking awards: Euromoney Ranking: 'n' denotes 'nominated' Capital Market Banks '' Capital Market Bank s'' Underwrite debt and Equity , assist company deals (advisory services, underwriting and advisory fees), and restructure debt into Structured Finance products. Prominent amongst them include:
''See also: Mergers & Acquisitions '' Bank cards ''Bank cards'' include both Credit Card s and Debit Card s. Bank Of America is the largest issuer of bank cards.
Credit card machine services and networks Companies which provide credit card machine and payment networks call themselves "merchant card providers". These include:
INVESTMENT SERVICES Asset Management See Also: Investment management Asset management is the term usually given to describe companies which run Collective Investment Fund s. The following is Global Investor’s 2005 ranking of the top 10 investment managers by assets under management: Barclays Global Investors Hedge Fund Managers
Custody services Custody services and securities processing is a kind of 'back-office' administration for financial services. Assets under custody in the world was estimated to $65 trillion at the end of 2004. Prudential: Securities Processing Primer Firms engaged in custody services include:
INSURANCE RELATED See Also: Insurance Insurance Brokerage Insurance Broker s shop for insurance (generally corporate property and casualty insurance) on behalf of customers. Significant companies in this sector of the financial services market include: Insurance Underwriting Personal lines insurance Underwriter s actually underwrite insurance for individuals, a service still offered primarily through agents, Insurance Broker s, and Stock Broker s. Underwriters may also offer similar commercial lines of coverage for businesses. Activities include insurance and Annuities , Life Insurance , retirement insurance, Health Insurance , and Property & Casualty Insurance . Some well known insurers include:
Reinsurance Reinsurance is insurance sold to insurers themselves, to protect them from catastrophic losses. Firms in this sector include: ''See also: Underwriting '' INTERMEDIATION OR ADVISORY SERVICES Stock brokers (private client services) and discount brokers Stock brokers assist people in investing, online only companies are called 'discount brokerages', companies with a branch presence are called 'full service brokerages' or 'private client services. Some of these are:
Other low-cost brokerages that function in a similar way to a Dividend Reinvestment Program include:
CONGLOMERATES A financial services conglomerate is a financial services firm that is active in more than one sector of the financial services market e.g. life insurance, general insurance, health insurance, asset management, retail banking, wholesale banking, investment banking, ..... A key rationale for the existence of such businesses is the existence of diversification benefits that are present when different types of businesses are aggregated i.e. bad things don't always happen at the same time. As a consequence, Economic Capital for a conglomerate is usually substantially less than Economic Capital is for the sum of its parts. MARKET SHARE The financial services industry constitutes the largest group of companies in the world in terms of earnings and equity market cap. However it is not the largest category in terms of revenue or number of employees. It is also a slow growing and extremely fragmented industry, with the largest company ( Citigroup ), only having a 3 % US Market Share . The Opportunity: Small Global Market Share , Page 11, from the Sanford C. Bernstein & Co. Strategic Decisions Conference - 6/02/04 In contrast, the largest home improvement store in the US, Home Depot , has a 30 % market share, and the largest coffee house Starbucks has a 32 % market share, etc. Despite this fragmentation, financial service companies as a group are by far the most profitable in the world, and if any grew to the same market share percentages as any other retail industry, the potential profit would be large. 2004 S&P 500 index market capitalization in 2004: Street Authority
1999 S&P 500 index (500 large American companies) market cap in 1999: Contrary Investor
BRAND EQUITY Each year, '' BusinessWeek '' and Interbrand publish their 100 Best Global Brands study, ranking the Financial Value Of Brands . The following are the financial services companies in this list, ranked by this study for 2006 : BusinessWeek/Interbrand 2006 Global Brand Survey GLOSSARY Glossary for reading financial services reports:
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