By the end of 2017, 2,909 new broker-dealer firms had joined FINRA, but 4,557 firms had closed, according to 2018 FINRA Industry Snapshot report. This left a net decrease of 1,648 broker-dealers in existence, or a 31 percent loss in 15 years. Despite the addition of new participants each year, 2017 closed with only 3,726 registered firms.
“While we don’t want to sensationalize these statistics, it is tempting to say thank goodness for the new firms that were added,” reported Bedford and Main Financial Consulting in its Examining the diminishing broker-dealer landscape fall report. “Without them, the industry would now be looking at a mere 817 brokerage firms supporting the U.S. markets. But without any sensationalism, the reality of adding 2,909 firms, while losing 4,557 on a base of 5,374, equates to an industry turnover of almost 139 percent. And no, the 2007–2008 crisis, surprisingly, was not a significant contributor to so many firms folding. The percentage of firms folding has been strangely consistent throughout the 15-year period, typically in the 6 percent to 7 percent range. However, the number of new firms did markedly decline after 2008, from the 5 percent to 6 percent range, to new firms averaging only 3.2 percent of the annual totals.
FINRA provided a current registration update that reported as of July 2018, there were only 3,690 member firms.
Bedford and Main Financial Consulting concluded the reasons for the loss of these firms are due to technology, compliance and survival of the fittest.
To read Bedford and Main Financial Consulting’s full analysis of the current state of broker-dealer firms, click here.
