Number of BDs, Reps Drops for Second Straight Year, New FINRA Report Says
August 09, 2018
By Melanie Waddell, ThinkAdvisor
Small BDs “struggle with keeping up with burdensome FINRA requirements,” recruiter Jon Henschen said.
The number of broker-dealers and registered representatives continues to decline, with firms registered with the Financial Industry Regulatory Authority dropping to 3,726 in 2017 from 3,835 in 2016.
The number of registered reps fell last year as well, dropping to 630,132 in 2017 from 635,902 in 2016.
That’s according to the broker-dealer regulator’s just-released 2018 Industry Snapshot, a first annual statistical report on the brokerage firms, registered individuals and market activity that FINRA regulates.
FINRA states that it is sharing the statistical overview as part of fulfilling transparency goals under the FINRA360 initiative.
“Even though litigation is down and broker-dealers are finally making more profits off of money market accounts, small broker-dealers continue to struggle with keeping up with burdensome FINRA requirements,” said Jon Henschen of the broker-dealer recruiting firm Henschen & Associates. “It is getting to the point that the many firms under 10 advisors dread FINRA audits and are positioning themselves to be under a larger broker-dealer in order to simplify their life. As one BD owner told me, ‘This used to be a fun business, but not anymore.’”
Data ranges from the size and geographic distribution of the firms FINRA regulates to the number of individuals in the industry, along with firms’ trading activity and how they market their products and services.
The Snapshot, FINRA states, is “designed to increase awareness and understanding about the broad range of firms, individuals and trading activity that FINRA oversees.”
The following five states, according to the report, have the most firms and branches:
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.
As for the number of firms entering and leaving the brokerage business, 232 left in 2016 but 124 entered, while 205 firms departed in 2017 and 96 entered.
Broker-dealers’ most common marketing methods in 2017 were as follows:
Web information – public access;
Fund-specific information sheets;
Flyers and other hand-delivered material; and
Brochures, pamphlets and catalogs.
