Top 10 hottest trends in the IBD industry
In a year in which brokerage executives are jittery over the cost of complying with new regulations, the Federal Reserve's increase in short-term interest rates is expected to provide a cushion to the balance sheets of independent broker-dealers.
Before the credit crisis, when interest rates were close to 5%, IBDs enjoyed a significant stream of revenue from money market funds and cash sweep accounts, which are tied to clients' brokerage accounts.
The Fed's move at the end of 2008 to goose the economy by cutting interest rates to near zero essentially eliminated that cash from IBDs' bottom line.
A couple of large firms stated last year that an increase in interest rates could translate into millions in pre-tax earnings. But with the stock market off to a stormy start, the Fed may reassess the number of times it raises rates further this year.