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That puts it ahead of the agriculture, transport and utilities sectors.
It was also the sector offering the largest percentage of support to other industries.
The research, by NZIER, was designed to show how financial services was evolving, and to reflect its role in New Zealand, FSC chief executive Richard Klipin said.
"It shows that the sector has been the second-fastest growing and third-largest contributor to New Zealand's economic growth over the last four decades."
The research found there were 57,000 financial services employees in New Zealand. There were just over 8000 financial advisers, including AFAs and RFAs.
The life insurance sector was paying $3.3m in claims every day, on average, and had $2.5 billion in in-force premiums.
Financial services providers were making New Zealanders wealthier, the research showed.
Excluding property and land assets, total household financial assets hit $870b in 2017.
About $600b of that was in equities and investments. The total unconsolidated assets under managed funds in New Zealand was $135b in 2017, over 587 funds, a growth of 63% over the past ten years.
If that rate of growth continued, total household assets, excluding land and property, would hit $1 trillion in the next few years.
The researchers said fund managers were expected to maintain their revenue growth over the next five years but there would be challenges such as the emergence of roboadvice.
The 1884 AFAs and 6920 RFAs were also being challenged through technological change, they said.
“It is common place for insurance and investments to be accessed digitally in both direct and indirect channels, but there is a need to adapt further into digital processes as technology continues to evolve and deliver more cost-effective services.
“Technology is also changing how the sector manages its end-to-end processes and how it uses and shares data. With new start-ups appearing across the world using blockchain, artificial intelligence and other technologies, traditional companies may need to adapt quickly to not only provide more tailored products and services, but also consider how best to develop their distribution and claims processes for the future.”
Klipin said the growth of financial services was supporting the wider economy.
About 60% of KiwiSaver managed funds were being reinvested locally.
"The industry has unique role in supporting the production of other industries through helping them invest for growth or protecting them through insurance. Consumers are at the heart of our sector and it continues to expand because of the growing needs of New Zealand’s families and businesses. The industry is responding and evolving to ensure it delivers good outcomes as we help New Zealanders grow, manage and protect their wealth."
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