Trends of US Financial Services Industry

Trends of US Financial Services Industry

Industry Introduction

The US financial services industry is the most liquid market in the world. The industry plays a significant role in the facilitating and financing the export of commodities and agricultural products manufactured within the country. The industry contributed 8.3 percent to the GDP of the country which accounted for USD 1.3 trillion in 2011. In the same year the assets of the industry increased to 58.6 trillion and marked an increase of 0.4 percent over 2010. The industry comprises of segments like banking, securities and commodities, insurance and real estate. The industry is also responsible for employment of 5.8 million people across the country. This accounts for 5.3 percent of the country’s total employment in 2011.

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Source: Insurance Information Institute

Current Scenario

The financial services industry was in turmoil for the past three years. The industry has currently recovered from the fluctuations. The banking segment has recovered itself from the crisis situation and the federal bank has granted permission to the top four banks of the country to recommence or raise dividend pay-outs. The revenue for the industry increased in the second quarter of 2013 by 0.8 percent as compared to the first quarter and amounted to USD 879.9 billion. There has been a noteworthy development in the industry with over 1500 private fund advisers registered with Securities and Exchange Commission (SEC) at the end of 2012. With this development the hedge funds have opened doors to new SEC inspection regime. The mutual fund segment has recovered from the turbulence of crisis period and the assets under management of the segment reached USD 12.7 trillion. The private equity segment is also having an upward trend with assets under management reaching to USD 3 trillion in 2013. The banking segment is also on the growth phase the initiative of quantitative easing by United States Treasury and Federal Reserve, an undertaking of the central bank is an effort to increase the demand for loan and in general economic growth. The banking segment is introducing Cloud Computing platform for the service delivery for better customer retention.

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Source: Insurance Information Institute

Outlook

The outlook of the financial services industry looks optimistic despite the setbacks the industry received in the past three years. The hedge funds segment is increasing becoming popular. The competition is increasing between the traditional and non-traditional asset managers. The new players within the industry are closing down the gap of the hedge funds, private equity funds and mutual funds. It is expected that hedge fund strategies will double the assets by 2016. The future for Registered Investment Advisors (RIA) is also bright. According to the SEC predictions RIAs with USD 100 million valuation of client asset management will double its value by 2021. In the banking segment, the data management capabilities are being enhanced. Technology based strategies are gaining importance for improving margins and for overall performance improvement.

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