SEED Plan for Finance and Insurance
In this article, we take a closer look at the different types of companies in the Finance and Insurance industry, their role in the nation’s economy, and the significance of ESOP in this sector.
The Finance and Insurance industry is the backbone of a nation’s economy. The health of this sector determines the overall wellness of the population. In the US alone, there are more than 475,000 financial establishments that contribute about $4.5 trillion in annual revenue. With a range of services that cater to savings and market capitalization, this industry acts as a focal point for all personal and business operations. The smooth functioning of this sector minimizes financial risks in all other sectors. This in turn impacts the income and expenditure of individuals in the country.
Finance and Insurance Companies
The Finance and Insurance industry is dedicated to managing funds. They play a direct role in facilitating the movement of money in the economy. Some of the big names in this sector are Bank of America, AIG, Citigroup, Goldman Sachs, JP Morgan Chase, and the likes. Globally, some of the financial hotspots are London, New York, Hong Kong, Singapore, Tokyo, Seoul, and Zurich. But what do these companies exactly do? What is their significance?
What are Finance and Insurance companies important?
The primary function of companies in the Finance and Insurance industry is to facilitate financial transactions across all platforms. The International Monetary Fund describes financial services as the process by which consumers and businesses acquire financial goods. Financial goods can be of many forms – stocks, bonds, loans, commodity assets, real estate, and insurance policies. The Finance and Insurance companies help to create, liquidate, and purchase these financial assets.
Finance and Insurance industry companies can be small firms or large corporations. Large corporations by their capacity to handle capital are well reputed and get access to large deals at cheaper capital. Meanwhile, small firms are best at innovative products, niche specializations, customer service, and in-depth understanding of the regional market. Banks, investment houses, lenders, real estate brokers, and insurance companies are all different types of financial institutions contributing to the movement of money.
With their wide range of products and services, Finance and Insurance industry companies are crucial for the economy because:
- They have a direct impact on the free flow of capital and liquidity in the marketplace.
- They contribute to the prosperity of the entire population.
- A strong finance sector automatically strengthens employment opportunities, average salaries, and purchasing power of the industry.
- A failure of this sector plummets the economy into a recession, in turn triggering unemployment and related adverse effects
Industry Forecast
The industry forecast for the Finance and Insurance sectors remains strong for 2021, with a forecast of 9.9% CAGR (compound annual growth rate) as in the report by ResearchAndMarkets, as well as a predicted 8.3% growth as forecasted by Interindustry Economic Research Fund. These reports show that the industry has a bright outlook for 2021 and beyond, and despite the economic downturn brought on by COVID-19, these sectors are expected to grow.
Types of Finance and Insurance
The Finance and Insurance industry can be categorized into four sectors. Each of these has a specific function and caters to a certain segment of society. The different types of financial services are:
- Banking: This is the nerve center of the finance industry. They deal with direct savings and lending. Based on their mode of operation, there are commercial banks, community banks, or credit unions. The Banking industry is further classified into 3 segments:
- Retail banking: Otherwise known as consumer/personal banking, this sector caters to direct customers. Eg. Savings accounts, mortgages, loans, etc.
- Commercial banking: Otherwise known as corporate/business banking, this sector provides credit products and accounting services catering to the specific needs of small financial institutions as well as large corporations.
- Investment banking: This sector is not for the general public. It works only with HNIs and deals with facilitators. They perform functions such as underwriting deals, access to capital markets, tax advisory, assistance in mergers and acquisitions, and most of all buy-sell of stocks.
- Investment services: This type of financial service operates broadly in three ways:
- For individuals: Creates access to stocks and bonds through brokers and online brokerage services.
- For institutions: Facilitates and manages hedge funds/mutual funds/investment partnerships investing capital in the markets
- For equity funds: Facilitates private equity investors, venture capitalists, angel investors to invest in growing companies in exchange for equity.
- Insurance services: This section of the Finance and Insurance industry acts as the safety net. They deal with financial products that are aimed to create a backup for the insurer in case of accidents and damage to a person, property, or business.
- Taxation and accounting services: This sector can be seen as the crucial support service that enables the smooth functioning of all other financial services. It includes tax filing services, wire transfers, debt resolution services, global payment providers such as Visa and MasterCard, and credit card network and machine services
Finance and Insurance Industry Statistics
By number of firms:
| # of employees | Average | 2017 | 2016 | 2015 | 2014 | 2013 |
|---|---|---|---|---|---|---|
| 0-9 | 86.55% | 86.84% | 86.68% | 86.53% | 86.41% | 86.28% |
| 10-19 | 5.67% | 5.56% | 5.64% | 5.69% | 5.71% | 5.75% |
| 20-49 | 3.82% | 3.66% | 3.76% | 3.84% | 3.89% | 3.95% |
| 50-99 | 1.61% | 1.56% | 1.57% | 1.60% | 1.63% | 1.67% |
| 100-199 | 0.97% | 0.97% | 0.96% | 0.96% | 0.97% | 0.98% |
| 200-499 | 0.67% | 0.68% | 0.68% | 0.66% | 0.67% | 0.66% |
| 500+ | 0.72% | 0.73% | 0.71% | 0.71% | 0.71% | 0.70% |
As per this data observed between 2013 and 2017, a majority of firms in the Finance and Insurance industry operate with less than 10 employees. This section forms close to 87% of the industry. In the second category are companies with 10 – 19 employees, but this is only 5.67% of the industry. Last of them all are firms employing more than 500 people forming only 0.72% of the sector.
On the whole, the Finance and Insurance industry functions with small firms employing 0 – 9 personnel. These small companies can help drive growth by increasing their employee involvement and implementing more ESOP plans in the Finance and Insurance industry.
By number of employees:
| # of employees | Average | 2017 | 2016 | 2015 | 2014 | 2013 |
|---|---|---|---|---|---|---|
| 0-9 | 8.31% | 8.07% | 8.19% | 8.42% | 8.48% | 8.39% |
| 10-19 | 2.86% | 2.72% | 2.80% | 2.91% | 2.93% | 2.94% |
| 20-49 | 4.38% | 4.07% | 4.24% | 4.46% | 4.55% | 4.60% |
| 50-99 | 4.07% | 3.83% | 3.90% | 4.13% | 4.21% | 4.28% |
| 100-199 | 4.70% | 4.59% | 4.57% | 4.71% | 4.79% | 4.85% |
| 200-499 | 6.63% | 6.52% | 6.61% | 6.67% | 6.80% | 6.56% |
| 500+ | 69.04% | 70.19% | 69.70% | 68.71% | 68.25% | 68.37% |
Meanwhile, when employee preference is observed during the same five year period, it looks like the majority of the workforce preferred to work for companies employing more than 500 people. On an average, almost 70% of the industry was employed in large companies. This trend has remained more or less consistent between 2013 and 2017. Companies with 10 – 19 employees were the least preferred at only 2.86%.
Overall, the trend of employees seems to swing towards large companies with 500 or more people.
Top Jobs/ Average wages per job:
| 2019 | 2019 | 2019 | 2018 | 2017 | |
|---|---|---|---|---|---|
| Sample Size | Employment % | Average Salary | Average Salary | Average Salary | |
| All Occupations | 5,972,610 | 100.00% | $75,280 | $73,170 | $71,440 |
| Office and Administrative Support Occupations | 2,290,570 | 38.35% | $42,320 | $41,100 | $40,020 |
| Business and Financial Operations Occupations | 1,563,410 | 26.18% | $86,560 | $85,720 | $86,050 |
| Financial Specialists | 964,250 | 16.14% | $92,970 | $92,550 | $93,420 |
| Sales and Related Occupations | 940,600 | 15.75% | $78,540 | $80,660 | $79,080 |
| Information and Record Clerks | 882,720 | 14.78% | $40,910 | $39,940 | $39,220 |
| Sales Representatives, Services | 842,770 | 14.11% | $80,170 | $82,810 | $81,460 |
| Financial Clerks | 631,160 | 10.57% | $35,210 | $33,860 | $32,690 |
| Business Operations Specialists | 599,160 | 10.03% | $76,230 | $74,490 | $73,680 |
| Customer Service Representatives | 557,840 | 9.34% | $40,030 | $38,860 | $37,990 |
| Management Occupations | 545,360 | 9.13% | $153,420 | $152,620 | $151,590 |
| Computer and Mathematical Occupations | 438,650 | 7.34% | $99,070 | $96,090 | $94,360 |
| Tellers | 432,420 | 7.24% | $31,630 | $30,100 | $28,850 |
| Securities, Commodities, and Financial Services Sales Agents | 412,600 | 6.91% | $92,710 | $98,550 | $97,320 |
| Insurance Sales Agents | 397,490 | 6.66% | $67,900 | $68,020 | $67,130 |
| Computer Occupations | 388,830 | 6.51% | $98,480 | $96,100 | $94,350 |
| Other Office and Administrative Support Workers | 382,830 | 6.41% | $41,460 | $39,990 | $38,560 |
| Operations Specialties Managers | 283,890 | 4.75% | $147,910 | $146,910 | $144,860 |
| Credit Counselors and Loan Officers | 275,940 | 4.62% | $74,550 | $74,330 | $75,990 |
| Loan Officers | 266,460 | 4.46% | $75,330 | $75,270 | $77,020 |
| Claims Adjusters, Appraisers, Examiners, and Investigators | 223,730 | 3.75% | $68,250 | $66,940 | $65,810 |
| Insurance Claims and Policy Processing Clerks | 217,030 | 3.63% | $43,640 | $42,380 | $41,280 |
| Claims Adjusters, Examiners, and Investigators | 210,630 | 3.53% | $68,370 | $67,010 | $65,870 |
| First-Line Supervisors of Office and Administrative Support Workers | 205,750 | 3.44% | $64,340 | $63,120 | $61,770 |
| Financial Managers | 199,530 | 3.34% | $147,720 | $147,940 | $146,170 |
| Personal Financial Advisors | 195,810 | 3.28% | $120,830 | $123,210 | $125,840 |
| Financial and Investment Analysts, Financial Risk Specialists, and Financial Specialists, All Other | 184,240 | 3.08% | $105,890 | $114,160 | $111,170 |
| Loan Interviewers and Clerks | 176,650 | 2.96% | $41,780 | $41,110 | $40,510 |
| Secretaries and Administrative Assistants | 173,310 | 2.90% | $51,380 | $49,630 | $47,560 |
| Software and Web Developers, Programmers, and Testers | 151,680 | 2.54% | $110,180 | $107,580 | $105,090 |
| Top Executives | 148,200 | 2.48% | $163,410 | $163,950 | $164,440 |
| General and Operations Managers | 133,660 | 2.24% | $156,420 | $156,100 | $155,980 |
The classifications for these occupations often overlap one another, so total employment size % may result in a larger number than 100% for all jobs.
Data trends observed between 2017 and 2019 for a sample size of 5,972,610 shows that salaries across all profiles of the Finance and Insurance industry show a steady rise. In 2017 it was $71,440. This increased by 5.34% and reached $75,280 by 2019. The five most preferred jobs were:
- Office and Administrative Support Occupations
- Business and Financial Operations
- Financial Specialists
- Sales and Related Occupations
- Information and Record Clerks
The role of Office and Administrative Support Occupations was the most preferred and employed 38.35% of the workforce in 2019. Their average salaries too posted a 6% growth between 2017 and 2019.
Business and financial operations on the other hand were the second most employable job in 2019 engaging 26.18% of the workforce. In 2017 the average salary was $86,050 which rose by 2% and reached $86,560 in 2019.
Meanwhile, financial specialists made up close to 16% of the Finance and Insurance industry employment. In 2019, the average salary for this profile was almost $93,000 and this trend has remained consistent since 2017.
This was closely followed by Sales and related occupations and Information and Record clerks providing 15.75% and 14.78% employment in 2019 respectively. However average salaries of the sales and related occupations posted a decline of 0.86% in these three years, while that of information and record clerks grew by 4.31%.
ESOP in Finance and Insurance
An Employee Stock Ownership Plan (ESOP) is an ingenious way of involving employees in company ownership. This approach of ownership creates an overall shift in employee mindset connecting their everyday performance with their retirement benefits. However, the Finance and Insurance industry not only grants ESOP to their employees but creates products that complement the ESOP system.
Why is offering ESOP a better option for Finance and Insurance companies?
The best type of financial service that supports the ESOP scheme is Life Insurance. It protects the company and the employees involved in the ESOP scheme in the following ways:
- An ESOP scheme is a considerable investment. When a company loses or is forced to let go of an employee, the life insurance scheme covers the creditor demands. Besides, in the case of multiple owners, human resource turnover is inevitable. The Life insurance scheme protects the company in these situations including death, disability, and estate issues.
- A Life Insurance scheme against an ESOP can be used as collateral for loans.
SEED by Eqvista – Plan for Finance and Insurance
SEED by Eqvista is a unique ESOP for the finance and insurance industry. It caters to companies of all sizes starting from formative ones operating with 0 – 9 employees to established ones with more than 500. SEED by Eqvista provides customized equity reward plans that are a combination of time based and milestone based vesting. However, the percentage varies based on the number of employees at work.
SEED by Eqvista also outlines vesting schedules for each company type. This ranges between 3 – 4 years with varying cliff and credit periods. However, the employee pool size ranges between 10 – 20% based on company size. SEED by Eqvista is designed in a way that caters to all categories of employment and company size in the Finance and Insurance industry.
Interested to Implement SEED plans for your Finance Business?
Equity management is an important function of any firm planning to engage in ESOP for employees. When the company is small in size, equity distribution can be tracked using a cap table on a simple excel sheet. However, when the company grows and includes multiple stakeholders and investors with varying equity needs, manual equity management on excel sheets become complicated. Eqvista is a leading equity management software that caters to a wide range of equity distribution services.
Read more about our services here, including our cap table software and 409a valuation services. To know more, reach us today.
More about Simple Employee Equity Development or SEED by Eqvista
SEED Plan for Agriculture, Foresty, Fishing and Hunting SEED Plan for Mining, Quarrying, and Oil and Gas Extraction SEED Plan for Utilities SEED Plan for Construction SEED Plan for Manufacturing SEED Plan for Wholesale Trade SEED Plan for Retail Trade SEED Plan for Transportation and Warehousing SEED Plan for IT and Tech CompaniesInterested in issuing & managing shares?
If you want to start issuing and managing shares, Try out our Eqvista App, it is free and all online!