The number of registered representatives overseen by the Financial Industry Regulatory Authority Inc. (FINRA) and brokerages declined again last year, according to the broker-dealer self-regulator’s 2021 FINRA Industry Snapshot.
FINRA regulates a critical part of the securities industry – brokerage firms doing business with the public in the United States. The 2021 FINRA Industry Snapshot provides a high-level overview of the industry, ranging from the number of FINRA-registered individuals to the overall revenues of firms, and from trading activity to how firms market their products and services.
In 2020, there were 617,549 broker representatives registered with FINRA, compared with 624,662 in 2019 and 639,442 in 2015. Last year only 38,145 left the industry compared to 31,032 who entered it. An individual is considered to have left the industry when the individual has no open registration with any FINRA approved member firm from the date of their last registration through the end of the next calendar year. It’s the fifth year in a row of erosion since 2015.
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 FINRA-Registered Broker Dealer Firms in 2020 was 3,435, a decline from the 3,517 in 2019 and 3,607 in 2018. In 2011 the total 4,455. Last year, 210 firms left the industry, while 128 entered.
Each category of brokerage firm – large (500 or more registered representatives); Mid-Size Firm (151-400 registered representatives) Small Firm (1-150 registered representative)- declined in 2020 from 2019 levels.
The number of large firms dropped to 165 from 168; medium to 191 from 198; and small to 3,079 from 3,151.
“Broker-Dealer Firms Only” refers to firms that are solely registered with FINRA as broker-dealers. “Dual Broker-Dealer and Investment-Adviser Firms” refers to FINRA-registered broker-dealers who are also registered as investment adviser firms. “Investment Adviser Firms Only” refers to firms that are registered only as investment advisers and are overseen by the SEC or state regulators.
The brokerage industry continues to shrink and its 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.
While brokers and advisors may fill similar roles in a client’s life, the services they offer and fees they charge can vary greatly. In simple words: Financial advisors advise, and brokers sell.
The brokerage industry is contracting but aggregate financial information shows it is still doing well.
Last year, aggregate revenue for Finra-registered firms totaled $362 billion, down from $388 billion in 2019 but higher than every other year since 2016 when it stood at $271,5 billion. Aggregate expenses in 2020 stood at $284,7 billion, resulting in a pre-tax income of $77.2 billion.
