Main Financial Services Companies

‘Financial services companies are institutions that deal with management of money. These institutions are banks, stock brokerage companies, insurance companies and investment funds companies. Unlike other companies that buy and sell commodities, financial services companies deal with money as their primary commodity. The business involves taking money from customer and then lending it to borrowers or investing it in ventures that guarantee good return for both the financial services company and the customer.

In this article we explore how each of the mainstream financial services company operates. Commercial banks are the most well known financial services companies. The basic function of banks is taking money from customers for safe keeping and allowing withdraws at convenience both parties. Banks provide loans to individuals and corporate entities for personal developments such as mortgages as well for commercial purposes. Banks charge interest rate on loans given which form one of the banks sources of revenue. Other services offered by the banks include issuance of credit cards to facilitate credit transactions and debit cards for direct purchases, wire transfer of funds between banks and provision of overdraft facilities to current account holders among others.

Insurance companies are also primary financial services companies as they hold large amounts of money taken in form of premiums to protect the insured against the unforeseen risk of losing life or property. The insured makes regular payments to the insurer on the understanding that the insurer will indemnify the insured in case of a financial loss. Both the insurer and the insured enter in to a legal contract that gives details of terms and conditions of compensation in the event of a loss.
The other category of financial services companies is the investment fund management. These companies collect funds from investors in to a pool and use their financial markets knowledge to invest the money in securities and assets that guarantee higher return for the investors.

Stock brokerages are financial services companies that buy and sell shares and other securities in the stock market on behalf of investors. The investors benefit from dividends paid by the companies in which they are shareholders or may get capital gain by selling the shares at a higher price than they bought.