The financial services industry makes a substantial contribution to the U.S. economy. The financial sector accounts for approximately 8 percent of the total gross domestic product and the sector has experienced increases in size averaging 6.44 percent annually. That’s approximately 1.49 percent more than the U.S. GDP as a whole.

The financial services industry is also critical to the U.S. economy in terms of employment. The number of workers on payrolls in the financial sector represents approximately 4.5 percent of the total U.S. payroll and accounts for approximately 7.5 percent of total employee compensation.

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Furthermore, financial sector employment figures have averaged a 1.24-percent annual increase from 2002 to 2004 at the same time that U.S. employment as a whole has contracted by 0.06 percent annually. The sector is also significant in absolute terms: the U.S. Department of Labor’s “High Growth Industry Profile” indicates that the 2003 GDP generated by the financial services industry (including banking, securities and commodities and insurance firms) was over $2.5 trillion in current dollars, a 20.4-percent share of the total GDP.

The GDP of Rhode Island contributed approximately 0.35 percent to total U.S. GDP each year from 2000 to 2005. Over the same period, the financial services industry’s GDP in Rhode Island accounted for about 0.6 percent of the financial sector GDP of the U.S., twice the proportion that Rhode Island’s GDP contributes to the U.S. total GDP. The Rhode Island financial services industry comprised about twice the fraction of statewide GDP as the national financial services industry does to total U.S. GDP (13 percent for Rhode Island vs. 8 percent for the U.S. as a whole). This demonstrates how the Rhode Island financial services industry is both a driving force of Rhode Island’s economy and one of the state’s major contributors to the U.S. economy as a whole.

In addition to its current role in the Rhode Island economy, the sector’s role is likely to increase in the future: average employee compensation in Rhode Island’s financial services industry has increased by 7.63 percent annually, 2.29 percentage point higher than that of compensation for Rhode Island as a whole.

The 10 largest financial services employers in Rhode Island employ over 17,000 workers: Citizens Financial Group (5,500 employees), Bank of America (an estimated 3,000 employees), Metropolitan Insurance (2,000+ employees), Fidelity Investments (2,000+ employees), Amica Insurance (more than 1,250 employees), Blue Cross/Blue Shield of RI (over 1,100 employees), Sovereign Bank (over 1,000 employees), FM Global (750 employees), Liberty Mutual Insurance (385 employees), and Textron Financial Corp. (345 employees).

A recent report on “Financial Services Employment Trends” states that financial services has historically grown faster than the work force, and is projected to grow at the same rate as the work force through 2014. In the report, the “1 Year Trend” (last year, 2006) for Rhode Island is 6 percent, “5 Year Trend” (2002 through 2006) stands at 16 percent, and “10 Year Trend” (1997 through 2006) places at 49 percent. Taken as a whole, these facts clearly show the importance of the financial services industry in Rhode Island.

A collaborative endeavor among the government agencies, legislative branches, private sectors, chambers, trade associations and higher education institutes is necessary to sustain the growth in Rhode Island’s financial services industry. It is essential that a series of practical and yet innovative steps be taken to ensure a bright future for both the state’s financial services industry and its economy as a whole.

Rhode Island’s high-quality educational resources have constantly provided the diverse skills and quality work force that are essential to the state’s economic growth. Following the success of its four previous symposiums, the University of Rhode Island’s College of Business Administration is presenting the 2007 Financial Services Symposium with a central theme on the “Innovative Growth of Financial Services” on Tuesday, Nov. 6 at the Rhode Island Convention Center in Providence.

This symposium will provide a tremendous opportunity for participants to discuss major trends in the financial services industry and will address the importance of developing a long-term plan to keep the industry at the forefront of the Rhode Island economy. A stellar group of leaders from the financial, political and academic communities will gather for discussions on the financial services industry in Rhode Island. With a focus on technology, innovation and major industry-shaping trends, the symposium promises to offer valuable insight into both the prospects for the financial services industry in Rhode Island and the opportunities for and obstacles to its continued growth.

This will be a terrific forum for participants to both begin a dialogue and form potentially valuable partnerships.

To register online or for more information on the symposium, please visit: www.cba.uri.edu/fss

Shaw K. Chen is associate dean, professor and director of PACAP Capital Markets Research Center in the College of Business Administration at the University of Rhode Island