When most people hear the term financial services sector, the first thing they're likely to think of is the hustle and bustle of Wall Street. But there's more to the industry than just stock trading, investment services, and big banks. In fact, it's often considered to be one of the most important parts of the economy in many different countries.
Companies in this sector range from investment firms and brokerage houses, banks, insurance firms, credit and payment processing companies, and real estate companies to name but a few, and they all serve retail and commercial consumers alike. Two simultaneous trends characterize the financial services industry, namely specialization—companies that provide targeted services to customers—and globalization, or expansion of firms into developing countries and emerging market nations.
This article looks at some of the biggest names in the financial services sector. Keep in mind, though, this list isn't the be-all-and-end-all of financial services companies. In fact, we could have a seemingly endless list, but to make things easier, we've isolated four major companies in the sector.
- Berkshire Hathaway was formed in 1839 and is one of the most expensive stocks in the world.
- American Express focuses on credit card offerings, co-branded cards with hotels, and other travel services like traveler's checks.
- Wells Fargo is one of the largest U.S. banks by market capitalization and is among the largest 100 corporations in the United States.
- E-Trade was one of the first online discount brokerage firms targeting self-directed investors.
- Founded: 1839 (as Valley Falls Company)
- Headquarters: Omaha, Nebraska
- Chief Executive Officer: Warren Buffett
- Market Capitalization (as of April 27, 2020): $456.1 billion
Almost everyone has heard of Berkshire Hathaway (BRK-A), the company headed by Warren Buffett, one of the world's richest people. The company's stock is one of the most expensive in the world and trades on the New York Stock Exchange (NYSE).
Berkshire Hathaway was founded in 1839 as the Valley Falls Company in Rhode Island and was originally a textile manufacturing company. Buffett's involvement began in 1962 when he started buying shares in the company before assuming full control a few years later.
Berkshire Hathaway has an established record of financial success with companies that it has acquired over the years. The multinational conglomerate was initially composed of insurance companies including GEICO and National Indemnity but has expanded its holdings to include companies involved in real estate, transportation, the furniture industry, and several jewelry companies—notably Helzberg Diamonds.
- Founded: 1850
- Headquarters: New York City
- Chief Executive Officer: Stephen Squeri
- Market Capitalization (as of April 27, 2020): $68.5 billion
American Express (AXP) is one of the oldest financial firms in America, dating back to 1850. It was one of the first companies in the world to offer charge cards and is commonly recognized by its signature gladiator logo adopted in 1958. Today, American Express, or Amex as it's more commonly known, is a Fortune 100 company and a component of the Dow Jones Industrial Average (DJIA).
American Express continues to prosper despite competition from major rivals Visa and MasterCard, which have more aggressive credit card marketing strategies. The company focuses its attention on its credit card offerings, creating a number of co-branded cards with hotels and other travel services like traveler's checks, as well as venturing into the prepaid card business. The elite status of American Express is demonstrated by its ability to offer a premium black card charging a hefty $10,000 initial fee and a $5,000 annual fee.
The global financial services market is expected to reach $26.5 trillion by 2022.
- Founded: 1852
- Headquarters: San Francisco, California
- Chief Executive Officer: Charles Scharf
- Market Capitalization (as of April 27, 2020): $116.4 billion
Wells Fargo (WFC) is a global bank and financial services company with retail and commercial banking locations across the U.S., along with a presence in Hong Kong, London, Singapore, and Tokyo. The company is one of the largest banks by market capitalization in the United States and is among the largest 100 corporations in the United States.
Despite its success and position within the sector, the company has had its fair share of scandals. One of the most notable involved branches opening 1.5 million checking, savings, and credit card accounts without the consent of customers, which was widely reported in 2016. As a result, Wells Fargo was slapped with $185 million in fines.
E-Trade Financial Corporation
- Founded: 1982
- Headquarters: Arlington, Virginia
- Chief Executive Officer: Michael Pizzi
- Market Capitalization (as of April 27, 2020): $8.9 billion
E-Trade Financial Corporation (ETFC) was founded in 1982 in Palo Alto, California. Originally a private company, E-Trade went public through an initial public offering (IPO) on Aug. 16, 1996. The company was one of the first online discount brokerage firms targeting self-directed investors. It has continued to expand its business rapidly despite an influx of competition from older, much more well-established firms such as Charles Schwab.
E-Trade has garnered industry awards for its trading platform and consistently ranks in the top three online discount stock brokerage firms in the U.S. Along with acquiring a number of other online brokerage firms, E-Trade has grown its business by offering banking services to its clients, notably sweep accounts that allow for automatic transfers back and forth between savings, checking, and brokerage accounts.
On Feb. 20, 2020, Morgan Stanley announced it would acquire E-Trade in an all-stock deal totaling $13 billion. The combined company would result in more than eight million client relationships totaling $3.1 trillion in client assets. According to Barron's, the Justice Department approved the deal, which was expected to close during the fourth quarter of 2020.