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The saving and investing industry employs thousands
of people and represents one of the most important sectors of the economy. In the US, the financial services sector represents
over 20% of the market equity value of the main stock market index
(the S&P 500).
In order to make our financial world function - in order to
allow companies and governments to raise capital, and in order
for savers to earn a return and compound their money, the financial services industry and many pieces within it play a role. Clearly the
government also plays a role by setting laws and guidelines for what
is allowed and what is not allowed, and also frequently provides
incentives to stimulate certain kinds of behavior.
Larger financial services companies often play a role in more than one piece
of the puzzle and different firms also clearly put their empsases in differing areas. Some of the main areas
of activity are the following:
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Investment Banking: banking
services for companies and governments – including capital raising and buying and selling companies. This area of activity inxcludes corporate finance and mergers and acquisitions (M&A)
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Asset Management: managing
money for a return on behalf of private customers, institutions or employees, through mutual funds, dedicated pension plan funds, private equity funds and hedge
funds;
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Sales & Trading:
buying and selling stocks and bonds on behalf of clients or
for a proprietary trading book. This area is often split into sales and trading of equity related products (incl. stocks),
and sales and trading of fixed income products (incl.
bonds);
-
Retail/Consumer Banking:
banking services for private consumers -
everything from savings and checking accounts to the provision of certain asset
management services;
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Securities Services: thing administering stock positions for asset managers, holding
securities in custody, facilitating short selling by hedge
funds;
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Insurance Services: life
insurance and products that can have an asset management element
to them.
Clearly there are numerous firms acitve in each of these areas, and many firms are active
in more than one area - some of the larger ones are active
in almost all of them.
Some of the firms that are active in these areas include:
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Goldman Sachs: premier
investment bank and asset manager, with a very strong presence
in sales & trading and securities services. No retail
presence other than dealing with very very high net worth
individuals: www.gs.com
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Fidelity Investments:
one of the largest asset managers in the world: www.fidelity.com
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Vanguard: one of the
largest managers of index funds in the world: www.vanguard.com.
See the video on active
versus passive management here;
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Citigroup: International
financial conglomerate with operations in consumer, corporate,
investment banking and insurance: www.citigroup.com
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HSBC: Headquartered in
London, HSBC is one of the largest banking and financial services
organizations in the world. HSBC's international network comprises
over 10,000 offices in 83 countries and territories in Europe,
the Asia-Pacific region, the Americas, the Middle East and
Africa. www.hsbc.com
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UBS: one of the largest
asset managers in the world with a retail presence in Switzerland
mainly and active in all of the other areas; www.ubs.com
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Merrill Lynch: a US investment
Bank like Goldman Sachs and active in largely the same areas:
www.ml.com
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Lehman Brothers: similar
to Merrill Lynch and Goldman Sachs. www.lehman.com
These firms differ in their strengths, focuses and also very
importantly their cultures. For example, some firms are more
conservative, and some firms are more innovative and less traditional.
A lot of this can be gathered form their websites and from articles
on the firms in the press.
One of the things that characterizes the financial services
industry is innovation. Although the general concepts of what
a stock is, and how savers and users of capital interact have
and will always be largely the same, new products are constantly being
developed. For example, one of the largest new product areas
in recent years is in the area of exchange traded funds or ETFs –
funds that offer an exposure to a market or index, for example
the S&P 500 in a tradable form that, effectively like a stock, that also offers market exposure in a low cost manner (not unlike an index fund). Related to this is that
the financial services industry is therefore also a great place
to work for millions of people as it is fast-paced and performance
oriented, and also offers good to great incomes for many.
Employers in the financial services area typically look for
a number of characteristics in their employees:
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A track record of success;
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Motivation;
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Willingness to work hard and travel;
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Openness to new ideas;
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A university degree – sometimes
even advanced degrees.
Specific requirements and application details can all be found
on the companies’ individual websites. For questions,
comments or discussion on this topic please visit the ‘Financial
Services Forum’.
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