Still Good Times for Big Broker-Dealers, But Not So for the Small Guys

It's no secret. The broker-dealer ranks continue to shrink, with the smaller independents merging with bigger players or closing up shop post-SEC scrutiny. Reports show there were 5,029 member firms registered with the Financial Industry Regulatory Authority (FINRA) in 2006. That number dropped to 4,540 in May of this year. Registered reps fell from 658,173 to 631,726 during the same period. Branch offices dropped from 169,477 in 2006 to 163,676 in May 2011, taking registered reps and other office staff with it.

But the story for broker-dealers is a mixed bag, for sure. The biggest and best of the lot faired pretty well in 2010, especially given the state of the market. According to Financial Planning's annual ranking of independent broker-dealers, the top 50 had a median increase in revenue of 13.2 percent. Reports also indicate hiring is strong in the space. But word of easy recruiting, a result of industry consolidation, really means there just may be a bunch of folks out there still wanting for a job.

Meanwhile, in other broker-dealer news, FINRA's chairman and CEO Richard G. Ketchum reaffirmed the organization's stepped up surveillance efforts in a speech at the IRI Government, Legal and Regulatory Conference on Tuesday. FINRA's added 20 coordinators at district offices during the past year.

Part of the beef up is to further plans to get member firms to provide more detailed securities and other financial information on sales, purchases, and customer data. Ketchum mentioned paying closer attention to branch-level activity, by increasing the number of branch exams and refocusing exams at "point-of-sale". End run-FINRA examination staff are going to be spending more time on site at member branch offices. The increased oversight, as well as a push for standardized electronic data feeds with FINRA, is making for bigger and bigger headaches at the smaller BDs. Expect more exits from the business.