Data Reflects Incremental Decline In The Broker/Dealer Model And Incremental Increase In The RIA Model

Securities Law Alert

November 14, 2017



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Financial Institutions

In October 2017, the Financial Industry Regulatory Association (“FINRA”) published its annual statistics, revealing that, year-end 2016, there were 635,902 registered representatives in the United States, as compared to 643,322 in 2015, and 672,688 in 2007. During this same period since 2007, the number of member firms has decreased from 4,999 in 2007 to 3,835 in 2016.  This decrease is attributed by some as a flight out of the brokerage model into a Registered Investment Advisor (“RIA”) model.  Perhaps supporting this thesis are statistics published by the SEC, reflecting that the number of SEC registered RIAs has increased from approximately 10,900 in 2014 to more than 12,600 in October 2017. 

In July 2016, Charles Schwab, one of the industry’s leading service providers for RIAs, published a study of its internal clients, concluding that independent advisory firms have maintained a ten-year growth trajectory, experienced steady annualized growth in assets under management, and are continuing to add new clients.  Schwab further concluded that the growth was being experienced within firms of all sizes.  While one could posit that much of this growth is due to positive market performance since the financial crisis in 2008-2009, that would not explain the reduction in FINRA registered representatives and member brokerages. 

What appears certain is that there is a growing trend of financial professionals to conduct business through the RIA model.  The flexibility, perceived autonomy and profitability of the RIA model has proven to be a more comfortable place for advisors and investors alike. 

A link to FINRA’s statistics can be found below: 
https://www.finra.org/newsroom/statistics#reps