New Data Shows Wider Use of Financial Products and Services, Helping To Drive U.S. Economic Growth
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Kate Ennis, 202.589.2409, kate@fsround.org
Carolyn Gorman, 202.833.1580, carolyng@iii.org
WASHINGTON, DC, March 8, 2004 – As uncertainty about government and employer-funded retirement plans rises, the importance of self-funded and directed retirement accounts grows even faster. Trends over the past five years indicate that the banking, securities and insurance sectors are producing a new range of financial products to meet this demand, according to research from The Financial Services Fact Book: 2004, published by the Insurance Information Institute and The Financial Services Roundtable.
“We are in a kind of social and economic revolution,” said Gordon Stewart, President of the Insurance Information Institute (III). “Individuals have no choice but to take a more direct role in their financial future. Aided by the Internet, we are increasingly a nation of pension fund owners, risk managers, even bankers. Especially for those entering the workforce today, the old social contract between citizen, employer and the state no longer applies. Growth in financial services is inevitable.”
“Thanks to financial services modernization, consumers can meet and manage their financial goals through a full range of products and services offered by a single institution, or they can shop among many institutions,” Steve Bartlett, President and CEO of The Financial Services Roundtable. “The financial services industry’s role in financing the American dream has made it fundamental to economic growth, contributing to job creation and the gross domestic product.”
The Financial Services Fact Book: 2004 is a comprehensive collection of statistics about the nation’s banking, insurance, securities, finance and mortgage industries. The book illustrates trends in each sector of the financial services industry and in the industry as a whole, tracking patterns of growth and consolidation.
- A record number of Americans now invest in mutual funds. Total mutual fund assets reached $7.5 trillion in January 2004, the highest level since August 2000. At year end 2002, mutual funds accounted for 21% of the U.S. retirement market, or $2.1 trillion. This amount represented about one-third of all mutual fund assets.
- Americans now enjoy unprecedented convenience in using and shopping for financial services. The number of ATM transactions increased by more than 40% over the decade from 1993 to 2003. Responding to customer demand, financial institutions operated 371,000 ATMs nationwide in 2003, a 125% increase since 1997. Thirty-seven million Americans banked online at year-end 2002, a 164% increase since 2000.
- Financial modernization has increased competition among financial institutions resulting in more choices for consumers. Since the passage of financial modernization legislation in 1999, banks, securities firms, insurance companies and insurance agents have been able to form alliances to offer customers groups of products that meet their specific needs, such as state-sponsored college savings plans and new retirement investment options.
- Mortgage lending and home ownership continues to grow. The mortgage market grew by 11.6% in 2002 over the previous year. The rate of homeownership increased from 65.4 percent in 1996 to 68 percent in the third quarter of 2002. Mortgage refinancing increased by 27.3 percent from $1.1 trillion in 2001 to $1.4 trillion in 2002.
- The financial services industry is a major contributor to the U.S. economy. In 2001, the most recent data available, gross domestic product (GDP) grew by only 2.6%, but the financial services sector grew by 6.1%. Financial services generated 9.0% of the nation’s GDP in 2001. The number of people employed in financial services rose in 2002 for the fifth consecutive year to 5.8 million and made up 5.2% of the U.S. workforce.
- The financial services industry continues to converge. Traditional banking organizations have transformed themselves over the past five years into financial services companies, through the acquisitions of securities firms and, increasingly, insurance agencies and underwriters. Five hundred bank holding companies registered as “financial holding companies” in the first 12 months after the enactment of the Gramm-Leach-Bliley Act, allowing them to sell a wide range of investment products. While merger activity declined slightly from 2000 to 2002, that trend seems to be reversing, with several recently-announced mergers among large financial institutions.
The Financial Services Fact Book: 2004 includes more than 150 pages of statistical charts, graphs and tables; a summary of the Gramm-Leach-Bliley Act; a glossary of financial terms; a timeline of financial services legislation; and a directory of financial trade organizations. The book is free to Roundtable members, and all information is online at the Fact Book website, www.financialservicesfacts.org.
The Financial Services Roundtable represents 100 of the largest integrated financial services companies providing banking, insurance, and investment products and services to the American consumer. Member companies participate through the Chief Executive Officer and other senior executives nominated by the CEO. Roundtable member companies provide fuel for America's economic engine accounting directly for $17.1 trillion in managed assets, $724 billion in revenue, and 2.0 million jobs.
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