Broker-dealer index takes off post-election

With the Dow Jones Industrial Average shooting up 3.5 percent Wednesday in the wake of former President Donald J. Trump’s election once again to the White House, publicly traded broker-dealers and wealth management firms also took off, with the NYSE ARCA Broker Dealers index hitting a new 52-week high on Wednesday and closing at 826.85, an increase of 8.2 percent.

In the immediate aftermath of an election, it’s too early to tell the direct impact that a change in administration’s will have on longer term valuations of RIAs and broker-dealers, which have increased steadily for the past 10 to 15 years.

“The election has an impact on broker-dealer and RIA clients more than anything else, but the reason why the index is outperforming is probably due to the market today,” said Peter Nesvold, partner at Republic Capital Group.

But the pro-business, Republican policies of the first Trump term, most notably the 2017 tax cuts, are an indication that broker-dealers, wealth management firms, and registered investment advisors are likely to benefit over the next four years.

Tuesday’s election creates tailwinds for the wealth management industry.

“Without question, the election adds to the sellers' market for RIAs and broker-dealers,” said Vance Barse, founder and wealth strategist, Your Dedicated Fiduciary. “Easing financial conditions and Trump’s playbook, including extending the current tax cuts, could serve as a windfall for RIA owners.”

“If I was an RIA owner and on the fence earlier about selling, this would have me thinking about looking at an exit,” Barse said. “There’s no shortage of would-be buyers for wealth management firms.”

Shares of AlTi Global Inc., a giant wealth management firm and RIA, also rose in trading on Wednesday, increasing almost 5.6 percent to close at $4.93 for the day. AlTi Global, which merged and started trading in early 2023, saw its share price increase almost 40 percent in the month before the election.

Republicans favor a less strict regulatory environment, which drives down costs of doing business for wealth management firms. And Trump’s campaign proposal to increase tariffs on trade may impact financial services firms that have sizable international businesses, including giant banks.

Meanwhile, most RIAs who custody client assets at the Charles Schwab Corp. or are registered with LPL Financial Holdings Inc. or Raymond James Financial Inc. overwhelmingly focus on U.S. clients. Schwab, LPL, and Raymond James are included in the NYSE ARCA Broker Dealer index. It remains to be seen how tariffs could impact businesses like RIAs.