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The Complete Beginner's Guide To The Financial Services Industry

Cathie Ericson8-Minute Read
April 03, 2022

When it comes to something as important as your finances, you want to make sure you understand your various options and then exactly where your money is going and who’s handling it. Consider this financial services industry overview to be a primer of what you need to know about the many different types of professionals and firms that help give advice on your personal finances, including the financial products that allow you to invest and safeguard your assets — and watch them grow.

Financial Services Sector Overview

The “financial services industry” is a broad term covering a segment of our economy made up of both large and small companies that are focused on finance. Within the industry there is a wide variety of different types of companies that offer a spectrum of financial products. In this financial services industry overview, we break them down to answer all your questions about what a financial service is and help you decide what type of financial professional or product is the right one to meet your financial needs.

Financial Goods Vs. Financial Services

If you’re wondering what the financial services sector is, it’s how people acquire financial “goods,” otherwise known as products. Each type of product has its own separate entity — the servicer — that creates, markets and sells it.

For example, insurance companies sell life insurance and other insurance products; financial institutions offer savings accounts, checking accounts, and credit cards; wealth management firms help you purchase stocks, bonds or mutual funds to increase your net worth and help put you on the road to a secure retirement. We’ll read more about how these work throughout the guide.

What Services Make Up The Financial Services Industry?

Here is a comprehensive summary about the various types of institutions and professionals that make up the financial services sector.


This sector is the one you might know the most about because almost everyone uses a bank. There are different types of banks though, depending on the products and services you need.

Retail Banking

Retail banking is how individuals take care of managing their own money, including depositing it into checking accounts and savings accounts. You also would go to a retail bank to get personal loans, credit cards, mortgages, auto loans, and CDs and other types of savings products. Your local retail bank typically has a branch that you can visit and an ATM outside. Other times you might do all your banking exclusively online.

Commercial Banking

Commercial banks provide those same services for small businesses. So a merchant would deposit its daily profits into checking or savings accounts and get loans to fund the business. Commercial banks also provide business loans and real estate loans and might offer equipment financing for large purchases. In addition, they can help with cash management services as well as payroll and other business needs. Many banks offer both types of services for individuals and businesses.

Investment Banking

This type of banking is more specialized as its goal is to generate capital for companies, governments and other entities. It also can help with transactions such as mergers and acquisitions or corporate reorganizations, as well as initial public offerings of stock, known as IPOs.

Credit Unions

Credit unions provide similar services as banks to their members, but they are a nonprofit, whereas a bank is a for-profit company. Most credit union clients are individuals, although you can also use a credit union for commercial banking. One difference between a credit union and a bank is that credit unions may be more limited in the amount they can loan their members so you should make sure it fits your needs.


There are so many types of investments and professionals who handle them that it’s important to break them down. Here’s what you need to know.


An investment broker is a person or institution who handles investments for a client. These advisors can help you develop an investment plan customized to your financial goals or can simply act as the intermediary who conducts a stock trade on your behalf. Ask your broker what services they provide and how they charge for them to find the provider whose approach meets your goals and budget.

Financial Advisors

Financial advisors can help you manage your personal finances from a more holistic view. They can help with asset selection and asset management, but also often offer advice on additional financial matters, such as budgeting, retirement planning, estate planning, and even long-term care planning.

Robo Advisors

A robo advisor is a digital platform that makes financial planning recommendations based on algorithms. Robo advisors can either complement your in-person financial advisor or replace them if you prefer a tech-first approach. They can be an especially good option for someone who is opening an account with a small balance and doesn’t want or need to pay for hands-on attention.

Mutual Funds

Mutual funds are pooled investments, which means many investors put their money together to buy shares of stocks, bonds or other securities. It allows an individual investor to have access to a broad array of companies without having to buy stock in each of them individually.

Hedge Funds

Hedge funds are a financial vehicle that also use pooled funds that are invested in a wide spectrum of assets, including real estate, stocks, derivatives and currencies. What separates these funds from others is they are usually managed in a nontraditional way or invested in nontraditional asset classes. Given their volatility, they are often only available to high net-worth investors.

Investment Partnerships

An investment partnership is a business that’s formed specifically for investment purposes. It requires at least 90% of its assets to be intangible assets like stocks and bonds, and that 90% of its income is derived from that kind of asset. They often make investments that have the potential for high returns, but may be riskier.

Private Equity Funds

Private equity funds are like mutual funds or hedge funds, in that they use a pool of investments, usually from high net worth individuals or institutional investors. Then an adviser uses the funds to make investments in other companies. These funds are not registered with the Securities Exchange Commission (SEC), which means that they are not subject to public disclosure requirements.

Venture Capitalists

Venture capitalists are private equity investors or firms that invest in companies, typically with pooled investments, in exchange for an equity stake. They will typically work with small business and start-ups that are aiming to go public or be acquired, which is how venture capitalists make their profits.

Angel Investors

Angel investors are high net worth individuals who invest their own funds in start-up companies or small businesses. The goal is to earn a higher rate of return than with traditional investments but, as you would imagine, it can come with risk based on the company’s performance.


Everyone should have adequate insurance to make sure they are protected from the unexpected, whether it affects their health or property. Here are some terms you may come across in this sector. 


Insurance agents are sales people who represent one or more insurance companies and receive commissions for selling policies. They might sell automotive, property or life insurance.


Whereas an agent represents the agency, the broker represents the consumer. That means they work with their clients to find the best insurance policy for their needs, then turn it over to an agent who will complete the deal.


A reinsurer insures insurers — really! It is a company that offers financial protection for insurance companies that might be concerned they have too much risk or have too little capital available to cover their losses at any point in time.


Underwriters are the professionals who evaluate and analyze the risks associated with insuring people and assets. They determine how risky you are based on demographics and current and past behavior and set pricing based on that risk.

Tax And Accounting

Whether you’re a business or an individual, tax assistance can help you ensure you’re complying with often-complex tax laws, while simultaneously not paying more taxes than you have to.


Accountants help businesses and individuals handle their books, including making quarterly payments throughout the year. They can also help plan their tax strategy, such as providing advice on how their investments and business activities will affect their taxes — legally of course. An accountant knows the ins and outs of the tax code in a way that would be challenging for the average individual, given how quickly tax law can change.

Tax Filers

Tax filers take care of preparing tax returns and filing them with the Internal Revenue Service (IRS) on behalf of businesses and individuals.

Other Financial Services and Products

While it’s impossible to create a truly exhaustive list of financial services and products, here are a few more that you might commonly encounter.

Currency Exchange

A currency exchange is a business that can change one currency into another, say turning U.S. dollars into euros. You can acquire this service either online or in person at a bank or store.

Wire Transfer Services

Wire transfer services allow individuals or institutions to safely transfer money electronically around the world.

Debt Resolution Services

People with outstanding bills or credit woes may need a debt resolution service, a third-party company that will negotiate with your creditors to allow you to resolve the debt by paying less than you owe. It can get you out of a tight spot, but it can also have a negative impact on your credit. 

Global Payment Providers

These payment service providers allow sellers to accept credit and debit card transactions from their customers, in exchange for a percent of the transaction amount.

Financial Services And The Economy

The financial services sector is a crucial component of the national and world economy, affecting both individuals and companies. The stronger it is, the healthier the economy is.

A healthy financial services sector helps people get the money they need in loans for mortgages, home improvements, education, vehicles, and any other number of needs. It allows individuals to save for down payments, retirement, and other goals and safeguards their property and health through insurance. Businesses are able to grow and expand, thanks to a healthy financial services sector. And of course, it employs millions with solid-paying jobs, who are then able to provide good lives for themselves and their families.

The financial services industry typically thrives in an environment where interest rates increase moderately rather than rapidly, and there is a healthy balance between enough regulation to keep consumers’ money and rights safe, while not squashing new opportunities for financial services firms to offer creative new products that can benefit the sector in the long run.

The Bottom Line On Financial Services

As you can see, the financial services industry encompasses a broad array of professionals and products. It’s vital (and interesting!) to know the role each one plays in the larger financial ecosystem, as well as in your own financial health.

Want to know more about the financial services sector and how it affects your own personal finances? Visit our Learning Center to find out more about these and other topics.

Cathie Ericson

Cathie Ericson writes about personal finance, real estate, small business, education, retail/ecommerce and other topics for a host of brands and websites. Her work has been featured on major media websites, including U.S. News & World Report, Forbes, Business Insider, The Oregonian, Industry Dive, Boston Globe, CNBC,, and Yahoo Finance, among many others. Find her