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Broker-Dealer Firm Numbers and Registered Reps are Down, But Income Is Sharply Higher

By Rita Raagas De Ramos August 10, 2018

The total income of Finra-registered broker-dealer firms rose significantly over the past four years, even as the number of registered firms and registered representatives declined over the same period.

The combined pre-tax net income of 3,726 registered broker-dealer firms reached $38.2 billion in in 2017, up 48% from $25.7 billion reported by 4,146 registered firms in 2013. In 2017, the registered firms reported $308.7 billion in total revenues and $270.4 billion in total expenses.

Over the same four-year period, the total number of registered firms dropped by 10%. An examination of longer-term data shows the number of registered firms has declined steadily every year from a peak of 5,261 in 2003 – resulting in a 29% drop in the number of registered firms as of last year.

Small broker-dealer firms (with up to 150 registered reps) made up most -- or 90% -- of the total registered firms in 2017. Mid-size firms (with 151-499 registered reps) and large firms (500 or more registered reps) each made up 5% of the total.

Around 84% of the total registered firms in 2017 were broker-dealer-only firms, while 16% were dually-registered as broker-dealer firms and investment advisory firms.

The data comes from the Finra Industry Snapshot 2018, the self-regulator’s first-ever annual statistical report on the industry it regulates. The release of the data is in line with the ongoing Finra 360 comprehensive self-evaluation and organizational review.

Although there have been more small broker-dealer firms registered with Finra, they have been significantly outpaced by large and mid-size firms in terms of the number of branches and the number of registered reps.

There were 156,107 registered broker-dealer firm branches in 2017. Around 86% of those were branches of large firms, while mid-size and small firms each made up 7% of the total branches.

The total number of registered reps in 2017 was 630,132 -- fairly flat compared with 630,796 in 2013.

Data dating back to 2003 shows, however, that the number of registered reps has generally been declining – peaking at 672,688 in 2007 and at its lowest with 629,518 in 2011.

Around 81% of the total number of registered reps in 2017 were registered with large firms, 10% with small firms and 8% with mid-size firms.

Around 55% of the registered reps in 2017 were brokers while 45% were dually-registered as brokers and investment advisors. An average of 7% of registered reps have entered the broker-dealer industry over the past 10 years, while an average of 8% have left.

Finra’s industry snapshot also includes data on the geographic distribution of the registered broker-dealer firms, their trading activities, and how they market their products and services.

The top five states with the highest number of registered broker-dealer firms and branches are California (1,032 firms, 17,061 branches), New York (1,617 firms, 10,536 branches), Florida (701 firms, 10,237 branches), Texas (656 firms, 11,009 branches) and Illinois (647 firms, 7,299 branches).

The top five marketing methods of the registered broker-dealer firms are the use of publicly available information on websites; fund-specific information sheets; flyers and other hand-delivered material; brochures, pamphlets and catalogues; and periodic and other performance reports.