The brokerage industry continues to shrink.
For the fifth year in a row, the number of registered representatives overseen by the Financial Industry Regulatory Authority Inc. has declined, while the number of firms registered with Finra has fallen for the seventh consecutive year, according to the broker-dealer self-regulator’s 2021 Finra Industry Snapshot.
At the end of 2020, there were 617,549 broker representatives registered with Finra. That total is down from 624,662 in 2019. It’s the fifth year of erosion since 2015, when the total was 639,442. The downward trajectory in 2020 occurred because 38,145 left the industry compared to 31,032 who entered it.
In terms of types of registration in 2020, there were 317,936 registered only as broker-dealers, while 299,613 were dually registered as broker-dealers and investment adviser representatives.
The number of brokerages registered with Finra in 2020 was 3,435, a decline from the 3,517 in 2019. Brokerages overseen by Finra have declined steadily since 2011, when the total was 4,455. Last year, 210 firms left the industry, while 128 entered.
Each category of brokerage firm – large (500 or more registered reps), medium (151-499) and small (1-150) – declined in 2020 from 2019 levels. The number of large firms fell to 165 from 168; medium to 191from 198; and small to 3,079 from 3,151.
The brokerage industry contraction is a result, in part, of financial professionals leaving that side of the profession to become investment advisers, an industry segment that is overseen by the Securities and Exchange Commission.
The changing regulatory landscape has contributed to putting a strain on Finra’s finances, which collects membership fees from brokerages it regulates. Finra is projecting a loss this year that could require the organization to take $187.5 million out of its investment reserves, according to a 2021 budget summary the regulator released last week.
Although the brokerage industry is shrinking, it is still doing well financially. Aggregate revenue for Finra-registered firms totaled $362 billion in 2020, down from $388 billion in 2019 but higher than every other year since 2016. Aggregate expenses in 2020 were $285 billion, resulting in a pre-tax income of $77 billion.
The statistics in the Finra industry overview were culled from regulatory filings and reported in the aggregate. No specific firms were mentioned in the report. Finra began publishing its Industry Snapshot in 2018.
IRAs now hold nearly twice the assets of 401(k) plans — and most of that money didn't arrive through annual contributions.
A new survey finds that many women prioritize financial security but continue to leave savings in accounts that may not keep pace with inflation.
Roundhill, Bitwise and GraniteShares funds remain on hold while the agency weighs how novel ETFs should be regulated.
"Shares of alternative assets managers have lagged this year as investors grow wary of private-credit exposure."
The fintech platform is touting a new AI-free Planning Observations feature, which draws on IRS tax records to uncover opportunities for advisors.
Dan Biagini of American Equity says the steady decline of pensions, longer lifespans and a reset in interest rates are rewriting how advisors build retirement income
Direct indexing is on pace to outgrow ETFs and mutual funds. Northern Trust's Ken Lassner explains why the advisors who get it wish they had started sooner.
