FINRA: Broker numbers up for first time in years

12:56 08 May in In the News by rafferty

May 4, 2023

The number of people joining the brokerage industry increased for the first time in several years in 2022, driven by wealth managers joining both pure-play broker-dealer firms and hybrid outfits with an advisory arm.

That’s according to the Financial Industry Regulatory Authority’s latest industry snapshot, released on Thursday. The number of registered representatives at brokerages rose to 620,882 in 2022, up from 612,435 the previous year. Although that was only a modest 1% increase and the 2022 total came in below the 629,475 registered reps recorded in 2018, it still marked the first time the figure had climbed in at least the five previous years.

Increases were seen in both the number of firms registered solely with FINRA, the broker-dealer industry’s self-regulator, and so-called hybrid outfits with advisory arms also registered with the Securities and Exchange Commission. The number of pure brokerage firms rose 304,867 to 308,565 from 2021 to 2022 and the number hybrids went from 307,590 to 312,317 over the same two years.

Meanwhile, the total number of firms registered with FINRA continued to decline, suggesting consolidation remains an industry trend. That figure came in at 3,378 in 2022, down from 3,394 the year before.

By contrast, the number of pure advisory firms registered with the SEC continued its steady rise, suggesting that fee-only and similar business models remain popular among wealth managers. That figure went from 35,063 in 2021 to 35,399 in 2022.

“The RIA model continues to gain traction, especially amongst the younger generation of advisors,” said Mark Elzweig, the president of Mark Elzweig Company, a consultancy for financial advisors.

Those were just a couple of the takeaways from FINRA’s report. Here are a few others.

How you slice it

FINRA’s industry snapshot broke down the individual representatives by the size of the firms they worked at and their ages. Not surprisingly, most were likely to work at large firms, which FINRA defines as having 500 or more registered representatives. Roughly 83% of all reps, or 524,075 people, did so in 2022.

Jon Henschen, the founder of the Henschen & Associates industry recruiting firm, said the number of people entering the industry slowed significantly during the COVID-19 pandemic and related lockdowns. It’s not surprising, he said, that large firms have since emerged as the industry leaders in many ways.

“The larger firms’ ability to offer considerably large transition notes along with a greater variety of services gives them a clear advantage on the recruiting front,” Henschen said. “Larger firms are also more active in acquisitions of broker-dealers which accounts for a large portion of their growth.”

By contrast, only 50,866, or 8% of the total, worked at medium-sized firms with between 151 and 499 representatives. And 62,076, or 9.7%, were at small firms with 150 or fewer reps. The number working at large firms rose by nearly 3% between the two years, whereas the figures for both medium-sized and small outfits both showed decreases.