When deciding on the details of your career path, getting a basic grasp of how the economy works is essential.
The economy is essentially broken up into various segments called sectors, each consisting of companies selling goods or services to consumers. Businesses within the same sector have a similar offering to one degree or another.
If you’re interested in a career in financial services, learning about the industry is the first step to success. Below, Pocketbook Agency explains the different financial services groups and tips for getting your foot in the door.
Both people and corporations need financial services to survive and accomplish goals. The financial services sector includes various financial firms, such as banks, investment institutions, finance companies, and insurance providers. The financial services industry is perhaps the most critical sector of the economy, as it leads the world in equity market capitalization and earnings.
Essentially, financial services are defined as the processes by which businesses and consumers obtain economic goods. The most straightforward example is payment processing providers, which accept and transfer funds between consumers and merchants. Purchases via credit cards, debit cards, electronic funds transfers, and checks are all considered financial services.
The primary function of financial services companies is to manage money. Take, for example, financial advisors who consult businesses on behalf of a client and manage assets. While the advisor provides no direct investments, they bridge the gap between investors and the institutions issuing securities. Such services are a temporary task.
Contrastly, financial goods are tangible assets. For instance, a mortgage loan is a long-lasting product instead of a service. Real estate, insurance policies, stocks, and loans are also financial goods.
Remember that the financial services industry is the nation’s core economic driver. This sector allows for capital and liquidity to flow freely in the marketplace. If the financial services industry is robust, the economy naturally grows, and businesses in the sector are better equipped to manage risk.
But the state of the financial services industry is not only important to businesses; it’s vital to the prosperity and livelihood of a country‘s people. A strong financial services industry and economy typically lead consumers to make more money, resulting in higher confidence and purchasing power. Thus, businesses of all sizes benefit. And when an individual needs to make a large purchase, they open a credit account with a company in the financial services sector.
Unfortunately, the opposite is also true. A weak financial services sector can quickly bring the national economy down, leading to a recession and, eventually, a depression. The economy begins to suffer any time the financial system starts to collapse.
As we see in 2022, lenders impose stricter requirements and regulations, significantly drying up capital. Rising unemployment and reduced wages can cause people to stop spending their money. And central banks lower interest rates to compensate and artificially spur economic growth. These factors essentially occurred in the financial crisis that birthed the Great Recession.
Now that you have a general understanding of the financial services sector, it’s time to break the industry into subsectors and determine which is best for your career path. Here are four essential financial services groups to consider:
– Banking
– Investment Services
– Tax and Accounting Services
– Insurance Services
– Each of these subsectors revolves around money management. But as you will see, they come with unique roles, requirements, and benefits.
There is no financial services industry without the banking industry. This subsector primarily involves direct saving and lending, and less with the investments, redistribution of risk, and insurance. Many entities provide banking services, including central commercial banks, small community banks, and credit unions.
A bank’s revenue comes from the difference between credit account interest rates and the rates paid to depositors. The interest rates are spread between loans and deposits, commissions, and fees that banks money.
The banking subsector contains several segments; the most common ones are commercial banking, retail banking, and investment banking. Commercial banking (also called corporate or business banking) primarily serves large corporations and small businesses. It bases its credit products and account services on the specific needs of companies.
On the other hand, retail banking, or personal or consumer banking, caters to consumers. A retail bank’s financial services are tailored to individual checking and savings accounts, credit cards, mortgages, and loans. These banks also provide specific investment services.
Investment banks generally serve only high-net-worth individuals and investors. They provide wealth management advice, tax consultation, mergers and acquisitions (M&A) consultation, and access to capital markets. These banks also help individuals purchase and sell stocks and bonds. Most financial advisors belong to this niche as well.
People use investment services to access financial markets such as stocks and bonds. Human and self-directed online brokers facilitate the purchasing and selling of securities and take a commission.
Some financial advisors provide assets under management (a UM) for an annual fee and facilitate trade to develop and manage well-diversified portfolios. Fully automated incarnations called Robo-advisors offer many consumers financial advice and portfolio management.
Investment firms use partnerships, mutual funds, and hedge funds to collect management fees for financial markets. They charge for various services — from portfolio trading to legal, marketing, and compliance consultation. More software vendors are emerging as well. You can find many apps that facilitate client reporting and portfolio management.
Then there are angel investors, venture capitalists, and private equity funds that take profit participation or ownership steaks for providing investment capital to startups and companies. Many technology firms in the past 30 years owe much of their success to venture capital providers.
This is perhaps the financial services group with the lowest barrier to entry. Some of these include:
– Accountants
– Credit card machine services
– Tax filing service
– Transfer services
Accountants are responsible for helping businesses, and individuals remain financially compliant with generally excepted accounting principles (GAAP) and federal laws and regulations. They analyze and manage balance sheets, cash flow statements, tax returns, and income and loss statements.
Businesses use accountants to keep track of long-term financial transactions, prepare the general ledger, and make other preparations for entries to company accounts. Companies use the information compiled by accountants to produce cost accounting reports and closing statements. Most accountants use accounting software to abide by well-established accounting control procedures.
Another joint responsibility for accountants is preparing and filing taxes for individuals and businesses. They essentially provide detailed analyses of tax efficiency before suggesting how to limit tax liabilities down the road.
There are many opportunities in the insurance subsector. Just think of all the services created to protect individuals and businesses against death, injury, property damage, and liability:
– Business Insurance
– Car auto insurance
– Disability insurance
– Health insurance
– Homeowners Insurance
– Life insurance
An insurance agent represents a specific insurance provider, while an insurance broker works on behalf of the insured entities to find and manage insurance policies. There are many areas and job positions to consider, and insurance; these are just some of the most common.
So, you’ve decided to pursue a financial services career. Keep these quick tips handy for navigating the job application process:
Networking is your best friend. Make your mind up to network as much as possible in the finance industry, and it will prove invaluable as you apply for jobs with no work experience.
Put together an impressive resume that showcases your education and concisely explains your transferable skills. You also want to revisit your resume regularly to make any necessary updates.
Besides networking, finding a mentor in the financial services industry may be the most crucial tip. Not only can they help you to expand your network, but a mentor can teach you valuable skills and help you stay on track with your career goals.
You’re not going to become CEO at a prominent investment firm by year three (unless your dad’s retiring as CEO). Try to view entry-level jobs in a positive light. They get your foot in the door and provide the opportunity to learn, grow, and build beneficial working relationships.
Finally, spend ample time and energy preparing for your interviews. You should know much about the company and drop the position you’re interviewing for. And you should have answers ready for about 100 potential questions.
Remain humble, be nice, and show genuine interest in the specific job at hand. Further, find a way to highlight how your life experience can help you meet the demands of the position.
The financial services industry is fast and complex. It’s crucial to learn as much as possible about the sector and start planning your steps if you want to build a firm foundation for your financial services career.
Keep researching the financial services industry to determine which subsector (and segment) is the right path for you, and remember to contact Pocketbook Agency for potential jobs. We help countless employers and employees connect every year.
Sources:
Financial Services Industry Overview in 2022: Trends, Statistics & Analysis | Business Insider
Bank Definition | Investopedia
Accountant Job Description: Salary, Skills, & More | The Balance