Financial services refer to the financial services offered by the finance sector, which covers a wide array of financial institutions that handle funds, such as banks, credit-cards firms, credit-monitoring companies, and mortgage companies. The word ‘services’ is broad in the financial services sector because there are so many things that these financial institutions do for their clients. Many of them also offer consultancy services and investment advice. Financial services take on a number of roles, but their major activities include:
When a firm wishes to enter the capital market, they first have to register themselves with the SEC (Securities Exchange Commission) and go through a series of screening processes to ensure that their firm is solvent and capable of raising capital. The process of registration itself can be very complicated and time-consuming, and only accredited investors can gain access to the capital markets. Therefore, when looking to invest in the capital markets, financial services ensure that only large financial institutions can do so.
The next step in the process of raising capital is to identify the best investment opportunities. This is done by assessing both the intrinsic value of the firm’s shares and the relative attractiveness of those securities as a start-up. Financial services identify start-up equity through two methods, namely, through the use of valuation techniques or through the purchase of all new and originate securities. They will then determine which financial products will best serve the needs of the firm. In terms of the valuation techniques used, financial services will typically look at such factors as the price to book ratios, liquidity, market liquidity, and book value, as well as the credit quality of the company’s tangible assets.
The third step involved in the process of raising capital through the capital markets is the actual investment strategy. This is where financial services differentiate themselves from other financial service providers in that they have their own investment philosophy. The main elements that underlie the investment philosophy are risk aversion and a focus on long-term value. These two characteristics will ensure that a financial service provider does not risk losing money on any one particular transaction. Financial service firms will also look to diversify their assets and minimize their exposure to risk through different types of financial products.
Financial services also differ from other financial service providers in that they don’t undertake activities like securitizations (making an effort to obtain money in the form of loans against property or assets). This is because such activity requires a lot of money and risks, which financial services firms are better able to manage. Financial services providers also make use of leverage, which refers to the use of debt to attain greater tangible value. Leverage can help financial services firms minimize their risks and cover the risk at the same time.
Financial services ensure greater yield through efficient risk management and good financial planning. This involves taking advantage of the differences between various asset classes and using appropriate leveraging techniques. This helps firms obtain a greater return on equity, reduce costs and improve overall efficiency. Overall, financial services play a crucial role in the economic development of a country and help maintain its economic growth.