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Financial services

Financial Services is a neologism created by Banks, Insurance Companies, Investment Banks, and Brokerages, to describe what they see should be an industry which all those companies are fully integrated. This term arose around and because of the Gramm-Leach-Billey act of the late 1990s, which allowed these companies to merge. Critics say that this is a term which attempts to make the unison of these operations sound natural, ignoring the possible monopilization of these industries, and the possible problems from combining them.

Almost every company now which previously described themselves, as a Bank, and Insurance company, or a Brokerage house, now describes themselves in some way as a financial services institution. Allstate insurance for example, now provides CDs, and investment brokerage services. Bank of America offers full featured brokerage products, while E-trade has expanded into offering bank accounts and loans. Companies usually have two distinct approaches to this new type of business. One kind would be a Bank who simply buys an Insurance Company and an Investment Bank, keeps their original brans, and adds it to its holding company simply to diversify its earnings (outside the US, for example in Japan, its also permitted to have non financial services companies within the holding company, and many do). In this scenario, each company still looks indepedant, and has its own customers, etc. This is essentially the style of Citigroup, and JP Morgan Chase. In the other style, a Bank would simply create its own Brokerage division, and a insurance division, and attempt to sell those products only to its own existing customers, with incentives for combining all things with one company. This is the style of Washington Mutual and Wells Fargo Bank.

Financial Services, while as a whole industry is slow growing, is also extremely diversified, with the largest company (Citigroup), only having a 3 percent marketshare. In contrast, the largest home improvement store Home Depot has a 30 percent market share, the largest coffee house Starbucks has a 32 percent market share, etc. Even with this small market share, these companies are as a group by far the most profitable in the world, and if any grew to the same market share percentages as any other retail industry, the potential profit would be enormous.