Breaking the financial services industry down into five key areas is a good way to examine its full scope. Those five areas are banking, asset management, insurance, venture capital and private equity sub-industries. Each fuels both U.S. and global economic growth, and the five areas collectively employed over six million workers in 2015. SelectUSA, a cross-governmental program formed to create jobs and business investments in the United States, reports that the five sectors accounted for a full seven percent ($1.223 trillion) of the U.S. gross domestic product in 2014.
Financial services fund entrepreneurial ventures, fortify companies for domestic and foreign expansion, manage economic risk and safeguard the capital of individuals and organizations through insurance and re-insurance policies. According to SelectUSA, the U.S. accounted for $104.7 billion of exported financial services in 2014 alone. The financial markets in the United States are the primary destination for investment funds from around the globe. Many of those funds remain in the U.S. At least 128 of the Fortune Global 500 companies have selected the U.S. for their international headquarters.
Investors with financial needs who are also looking to manage risk can choose from a variety of investment instruments administered by experienced financial professionals. The financial services industry’s five areas each offer unique employment opportunities.
The banking industry continues to see rapid change as it matures in the digital marketplace. Security risks, new payment systems and big data all contribute to the banking industry’s innovations. The U.S. banking system had nearly $16 trillion in assets at the end of 2015, and its net income was up 7.3 percent to $161.5 billion for the same time period, according to SelectUSA.gov. This substantial growth indicates increased confidence in the financial markets in the United States and highlights the continued economic rebound in the U.S.
Charged with growing their clients’ portfolios, asset managers conduct research and statistical analysis on companies, markets and trends to determine the best financial opportunities — given their clients’ risk tolerance and diversification needs. Over 60 percent of the global retirement market is the responsibility of U.S. asset managers, who held over $51 trillion in conventional assets and $24.5 trillion in U.S. pension assets.
With net premiums totaling $1.15 billion in 2014 and U.S. firms buying a third of all re-insurance sold worldwide, the insurance industry uses extensive analysis to manage the premium funds it processes after paying out insurance claims. Insurance companies operate under heavy regulation at the state and federal levels and follow complex compliance laws, rules and directives. Insurance companies must maintain mandated reserves that safeguard their clients’ policies while concurrently delivering the best investment returns for their owners.
To facilitate the job creation and economic growth that comes from exploration and innovation, venture capital funds support individual companies and products in the U.S. entrepreneurial ecosystem. SelectUSA reports that “venture capital-backed companies employ 38 percent of the U.S workforce within public U.S. companies and account for 82 percent of private sector research and development since 1979.”
Private equity firms create partnerships between investors and companies that need capital. The majority of the funding serves the business services and consumer-related business sectors helping to develop companies, which in turn facilitates job growth. Upgrading facilities, employing experienced managers and expanding into new markets are some of the many uses of capital. In 2014, U.S. private equity investments came from more than 3,800 firms across the country. Private equity businesses employ 11.3 million people in the U.S. and 19.6 million worldwide.
The financial services industry holds the funds of private individuals, small businesses, large corporations and governments. Finding the financial market with the best balance of risk and reward requires expert knowledge of individual financial instruments, a sizable curiosity and investigative prowess, and an innate desire to respect the individual situations of clients. U.S. financial markets remain strong yet flexible in the face of global concerns, political uncertainty, and a continually changing economic landscape.
Learn more about the Texas A&M-Corpus Christi online MBA in Finance program.