What Is the Average Profit Margin for a Financial Services Company?

The financial services industry comprises a variety of companies involved in lending, managing, and investing money. It includes banks and credit unions, credit card companies, brokers, asset managers, insurance companies, and payday lenders. Each of these business types has a separate risk profile, which can affect its profit margins.

Key Takeaways

• The financial services industry includes banks and credit unions, insurance companies, asset managers, and a variety of other businesses involved in lending and investing money.
• There are different types of financial services businesses, with margins ranging from 5% to over 24%.
• The average profit margin for financial services businesses is around 10% as of 2024.

Understanding the Financial Services Industry

The financial services industry has served as common ground for investors seeking steady growth and income for decades, despite the 2008 economic downturn spurred by its mismanagement. Organizations that facilitate banking and insurance services, asset management services, lending and credit services, and brokerage operations have continued to increase their contribution to gross domestic product (GDP) each year, and they have a lasting impact on total stock market performance.

The financial services industry includes a large group of businesses that manage money. This includes banks, credit unions, investment groups, credit card companies, insurance companies, financial technology companies, financial advisors, and even mobile financial services. Profit margin for all these various subsectors of the financial services industry varies; whereas many financial services companies generate a revenue by charging a fee for their services, some more personalized services rake in a higher profit margin.

10.53%

The average profit margin for the financial services industry as of year-end 2024.

Financial Services Industry Profit Margin

Companies in the financial services industry have a strong history of consistency in return as well as steady dividend payments to investors, but not all companies within the sector are created equal. This can be seen in the wide range of profit margins from subsectors and specific companies. For example, although the average profit margin for the financial services industry may be 10.53% (as of Dec. 2024), the profit margin for the industry’s more concentrated subsectors ranges from 5.6% to 24.6%.

To determine whether an investment in the financial services industry is suitable in terms of the tradeoff between risk and return, analyze the sector’s management of cost by reviewing its profit margin. A company’s profit margin is calculated by dividing a company’s net income by its total revenues and is expressed as a percentage.

Most investors view a higher profit margin as more desirable, while a lower percentage may mean a company is not generating enough revenue to cover its operating costs. Analyzing a company’s profit margin is not the only way an investor can determine profitability, but this metric does provide more insight than a review of net earnings alone.

How Much Do Financial Services Professionals Make?

The financial services industry spans a variety of careers, with different levels of qualifications and compensation. Accountants and auditors can expect an average annual income of around $80,000, with higher incomes for those with the valuable CPA designation. Financial planners and investment advisers can earn an average salary between $120,000 and $150,000 per year or higher.

How Do You Get a Career in Financial Services?

Almost all career pathways in the financial services require a four-year degree, with actuarial sciences and finance being among the more common academic majors. In addition, an MBA or other professional certification may be required for higher-level financial careers. Some jobs, especially those that involve trading securities on behalf of clients, may require special certification from FINRA or other government regulators.

What Are the Biggest Challenges for the Financial Services Sector?

According to a survey of 501 key decision-makers at British financial companies, the biggest challenge facing the sector was economic turbulence. 44% of respondents said that this was among the largest difficulties, with regulatory compliance following at 43%. Cybersecurity, technological disruptions, and talent retention were also major concerns.

The Bottom Line

The financial services sector covers a whole ecosystem of businesses involved in handling money, from lenders and credit card companies to asset managers and retirement funds. Each of these lines of business has its own advantages and risk profile. Although profit margins range widely, the average profit margin is typically higher than other industries.