However, things aren't all rosy. The mature insurance sector is suffering from sluggish growth and declining operating profits as fewer people buy life insurance. The securities and investment business can be volatile, as last year's collapse of global capital markets and bankruptcy of hedge fund Long-term Capital Management show. In addition, a slowdown in the economy and a rise in interest rates could slow growth of the rocketing stock market and hurt companies' profits. The sector is undergoing major fundamental changes that promise to increase competition as well as opportunities.
Consolidation continues to transform the face of many businesses, especially banking and insurance.
Geographical borders continue to blur as more foreign institutions buy American firms and vice versa. Many firms are also bracing for the passage of the financial services reform bill, which would tear down the legal barriers limiting securities firms, banks and insurance companies from entering one another's markets, thus repealing the Glass-Steagall Act. Both Houses of Congress passed different versions earlier this year. President Clinton could decide on a compromise bill this year. While it would accelerate the creation of financial superstores, the bill would also intensify competition among firms and lead to fewer financial companies.