The finance industry is a system of interconnected services working together to sustain the country’s economy. Without the finance industry operating at its optimum efficiency, there would be little economic growth and reduced purchasing power. Every day, consumers and businesses receive financial services from loan services, consultancy agencies, and mortgage broker companies such as E2E Financial Solutions, banks, and other entities.
According to the IMF, there’s a difference between financial goods and services. Financial goods are tangible products (e.g., the mortgage, car insurance policy). On the other hand, financial services are the transactions involved when acquiring financial goods. Such services include banking, insurance, investment funding, consumer finance, and much more.
Here are some of the types of services offered by financials.
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Financial Planning and Wealth Management
Financial planning and wealth management are two sides of the same coin. They fall under financial advising. Financial planning deals mainly with assisting individuals (preferably middle-class income groups) in matters relating to cash flow planning, saving, budgeting for personal items, etc. Wealth management, on the other hand, deals with high net worth and ultra-high net worth clients. Wealth managers provide actual wealth management services to avoid unnecessary risks.
The main difference between financial planning and wealth management is the advice offered by the respective expert. Financial planning provides advice on daily spending to improve economic welfare for an individual, but wealth management seeks to provide information on how to retain wealth or increase it.
Financial planning deals with matters such as investment and retirement planning. It’s never too late to invest your money. A financial planner helps you identify the right opportunity and exploit it. You may have to change your goals along the journey and adopt a plan with minimal risks and maximum benefits.
Banking Services
Banking is the cornerstone of the finance industry. Commercial banks, retail, and corporate banks provide essential financial services to businesses and individuals for investment, growth, purchase of basic needs and essential services, debt payment, and much more.
There are several types of bank accounts/services, including savings accounts, checking accounts, debit and credit cards, online banking, and loan services. Banks have the duty to keep their customers’ financial assets safe. Some may also educate their customers through financial literacy programs. They may also opt to provide reliable advice on financial matters such as loans, interests, and investments.
Banks accept deposits from customers and use this money to make a profit. This is achieved by providing loans to other borrowing entities and individuals. The bank then pays the customer for the deposit in terms of interest and later charges the borrower a higher interest rate. This way, the bank can generate substantial revenue for its operations.
Reinsurance
Reinsurance is whereby one party transfers part of its risks to another party to help share the burden of a larger insurance claim. It works by ensuring that the insurer reclaims part or whole of the amounts claimed by the insured party (especially when the losses are high).
There are three major types of reinsurance; facultative, proportional, and non-proportional reinsurance. Facultative reinsurance covers the insurer for a specified risk. With proportional reinsurance, the reinsurance company is entitled to a share of the insurer’s premiums. Under non-proportional reinsurance, the reinsurance company should reimburse the insurance company if the losses exceed a certain amount.
Other Services Offered By Financials
- Mutual Funds – Mutual funds institutions provide a type of investment that lets many parties claim a share. However, these investments are managed by professionals rather than the investors themselves. Mutual funds allow investors to pool together resources and purchase bonds, stocks, and securities that would be difficult to acquire independently.
- Insurance services – Here, insurance companies pool their customers’ regular payments (premiums) to provide financial coverage against unforeseen risks. For example, a car insurance policyholder is entitled to reimbursement in case of a car accident. The cause of the accident and the value of the damage must first be determined.
- Trading – Banking services providers facilitate other companies to conduct foreign exchange (forex), buy, and sell securities, and much more.
- Safe payment methods – Sending and receiving money is now much easier than it used to be, thanks to technology. Customers can now make payments safely online or through other payment systems, including cheques, credit and debit cards.
Reaching a unified definition for financial services is difficult since various financial experts have distinct views. Financials offer many services. Whether you’re looking for a new career line, a new job, or services related to finances, digging deeper into finance with a trustworthy financial consultant should help clear the doubts.