Lately, there’s been a lot of talk about the financial services sector. How this sector is performing, what the sectoral indices are indicating, what kind of policy measures are needed to give it a boost, and so on.
Naturally, people not familiar with these jargons are remaining clueless about the brass tacks. This article is to help them get a deeper understanding of the finserv sector, how it works, and how it is doing lately.
What are financial services
The financial service sector is an industry that deals with matters related to money. It offers financial services to customers. Banks and insurance companies operate in this sector. So do investment advisors, retirement planners, subprime auto loan providers, credit card companies, debt negotiating firms, mortgage brokers and a whole host of other companies.
What I find interesting about this sector is the diversity of its customer base. No other sector has such a diverse pool of customers.From assembly line workers to billionaires, everyone needs financial services, and hence, the industry serves them all.
Demand for financial services
For financial service providers, getting clients, and retaining them is fairly easy, which is the biggest advantage of any company – large or small – operating in this sector. Yes, you do see adverts on television, newspapers and on the Internet promoting financial services but the conversion rate for such promotional materials is very high compared to other industries.
Sometimes, the service providers don’t have to look for clients as clients search for them. Surprised? Don’t be. It’s actually common sense. People need banks to keep their money safe. So banks don’t have to find them, they find banks and compare their offers to decide which one is the most reliable and offers profitable savings schemes. The same thing applies to insurance service providers.
Here’s a competitive analysis of how much financial services are in demand. Let’s compare this sector with online retail. For online retail companies, sales and outreach are top priorities. They go hammer and tongs at increasing sales and extending their marketing reach. Finserv companies, on the other hand, have a relatively easy time attracting customers because the services they provide are very high in demand.
Salary and employment perks
Employment opportunities in the finserv sector are endless. Several types of work are there, and the pool of human resources is vast. The main reason people are so interested in working in this sector is the salary. The median salary is over $100K a year. Of course, not everyone gets that much, and the salary largely depends on years of experience, skills, work hours, and performance.
The list of employment perks is huge. Networking opportunities are unlimited since finserv professionals are exposed to a very competitive field, frequented by thousands of other professionals, industry observers, influencers, and clients.
People experienced in direct sales love to work in finance because the opportunities are quite attractive. Whether it is banking, insurance, or unsecured lending, sales people have a monthly quota. Upon meeting the quota, they make extra money in the form of incentives. People in leadership positions often make more money by product and service-based incentives than their regular salary.
Industry verticals covered
The financial service sector has clients from every industry. Who doesn’t need an accountant to verify the books? Every single business. Not just businesses, individuals are nowadays hiring accounting firms to get an objective view of their earnings and expenses and to which direction their financial lives are heading.
Both B2B and B2C firms require financial services. Sometimes, normal accounting is not enough. If an organization suspects that someone, probably an insider, has cooked the books, they might hire a forensic accountant.
B2B and B2C customers have different needs from finserv providers. And then there are retail customers that have completely different needs. Large businesses mostly need banking and insurance services; they have an inhouse team to handle everything else. They borrow money from the banks and need insurance companies to protect their production units and/or delivery centers and machineries and/or corporate resources.
Future of this sector
To be honest, the future of the world economy seems bleak at this moment. The US-China trade war and volatile oil prices have caused a rippling effect of fear, uncertainty and doubt among investors all around the world.
The effects can be seen by the performances of major market indexes. At the time of writing this article, Shanghai Composite Index is down 0.92%, Nikkei 225 is down 2.01%, Dow Jones is down 0.19%, the FTSE 100 is down 0.64% and Sensex is down 0.52%. Only CAC 40 and Euronext 100 are marginally up.
As short-selling continues, investors are losing hope and investing in precious metals. Unless structural changes take place or governments around the world lower tax-rates, the situation is unlikely to change and bears will continue to have their grip over the market.
That being said, microfinance and small business lending are two areas witnessing constant growth recently and experts predict that this trend will continue.
I guess you have a clear idea about the financial service sector by now. Whether you want to take a loan or are looking for insurance services or even thinking of pursuing a career in finance, some background ideas are absolutely necessary. I’d be happy if the article helps you with that.