FINRA Broker Dealer Industry Snapshot Summary

At the end of July 2020, FINRA released its 2020 Industry Snapshot (https://www.finra.org/rules-guidance/guidance/reports-studies/2020-industry-snapshot).  Some interesting trends to observe include the continual decline of the total number of FINRA-Registered Representatives from 2015 through 2019.  The last year there was an increase in registered representatives was in 2014.  Consistent with this trend is the number of registered representatives leaving versus entering the industry.  2019 continued to have an outpaced number of registered representatives leaving the industry when compared to registered representatives entering the industry.

The total number of FINRA Registered Firms has continued to decline from 2015 through 2019 with most of the decline occurring in the small firm (1-150 registered representatives) category.  From 2015 through 2019, FINRA Registered Firms have declined by 426 firms to a total of 3,517 Registered Firms.  The snapshot reveals that of the 3,517 Registered Firms, 528 are dual broker-dealer and investment advisor firms while the remainder are only broker-dealer firms.  There is an increasing number of investment adviser only firms.  Investment adviser firms have increased by 1,823 firms to a total of 30,535 firms from 2015 to 2019.

 

FINRA

With the decrease in the total number of FINRA Registered Firms as well as FINRA Registered Representatives, revenues and expenses for these firms have been favorable with an increase in pre-tax net income of 94% from 2015 to 2019.

The snapshot highlights the increasing movement to the Registered Investment Advisor – only designation due to the increasing popularity of the fee-only model.  This may have a future impact of FINRA’s annual revenue, as the regulator earns funds based on per-rep fees.  FINRA has hinted in their annual budget summary that they will eventually raise regulatory fees which will result in an increased burden cost bore by the FINRA Registered Firms (which are on the decline….).

What does the future for FINRA Registered Firms hold?  Like many things right now, time will tell.  For further questions please don’t hesitate to reach out to me at mbenison@teamdkb.com.