Industry consolidation remains a dominant industry trend, according to data compiled by the Financial Industry Regulatory Authority and Investment Advisor’s 2020 Broker-Dealer Reference Guide.
FINRA’s latest figure for the total number of broker-dealers is about 3,500 — down from roughly 4,700 a decade ago and representing a drop of over 100 BDs on average each year.
The overall number of registered representatives is declining more slowly. It stands at about 629,500 vs. 630,300 a year earlier and 633,000 some 10 years ago.
Some recent deals in the broker-dealer space include LPL Financial’s purchase of Allen & Company last year; it had some 30 advisors and $3 billion in client assets. In late April, the IBD said it planned to buy Lucia Securities, which works with $1.5 billion.
And, of course, there’s the mega-deal that closed earlier this year: Advisor Group merging with the Ladenburg Thalmann BDs to create a group with about 11,300 advisors and $450 billion in assets.
(This transaction was announced in November, six months after private-equity group Reverence Capital Partners bought a majority stake in Advisor Group from Lightyear Capital, PSP Investments and others.)
In May, Advisor Group said three of the five ex-Ladenburg BDs — Investacorp, Securities Service Network and KMS — are set to become part of Securities America, the largest of the former-Ladenburg BDs. Securities America and SSN appear in this year’s top 10 lists, as do some other Advisor Group BDs.
Amidst the current turmoil, firms and their advisors can prove their mettle.
“Today, with some of these major strategy shifts, IBDs are proving to be more agile and adaptable to advisor demands and industry trends — and once again, represent a solid option for advisors considering independence,” explained Louis Diamond, executive vice president of Diamond Consultants.
Top 10 by BD Gross Revenue
The largest independent broker-dealer in the field continues to be LPL Financial, which had gross revenues of over $5.6 billion in 2019. Its gross profits were about $2.2 billion, and its net income was $560 million.
“We recruited $35 billion of assets over the full year, which was up from over $27 billion in the prior year,” according to President and CEO Dan Arnold.
IBD Raymond James Financial Services contributed some $2.6 billion of revenue to its parent company, which includes an employee-advisor segment and other businesses; in its fiscal year ending Oct. 31, 2019, the firm’s Private Client Group had net revenues of nearly $5.4 billion and over 8,000 advisors.
Other IBDs with strong gross revenue in 2019 include Commonwealth, Northwestern Mutual, MML, Cambridge and Advisor Group’s Royal Alliance.
Commonwealth said last fall that its fourth-quarter revenues were about 85% fee based and that commissions represent “an ever-shrinking number.”
Top 10 by Number of Registered Reps
LPL boosted its headcount by 355 from last year’s Top 10 list. It added 115 net new advisors in the fourth quarter.