FINRA Membership Statistics Demonstrate The Continuing Demise Of Small BDs, And The Accompanying Rise Of IAs

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For the third year, FINRA has published its now-annual (apparently) statistical accounting of its membership and the registered representatives who work for those firms. I went back and looked the blogs I posted after the 2019 report and the 2018 report, and, predictably (and somewhat sadly), the same trends continued last year as I previously observed:

  • The number of BDs continues to decline
  • The number of small BDs continues to decline even more precipitously
  • The number of IAs continues to increase

Let’s take a quick look at the numbers.

Number of BDs. Remarkably, for what is now the 14th consecutive year, the total number of BDs dropped. According to the chart provided in the report, from 2005 – the first year for which data is included – FINRA has lost 1,589 member firms, a drop of over 31%. Perhaps not surprisingly, the total number of registered representatives has declined for the fourth year in a row.

Number of small firms. While the net number of total FINRA member firms only dropped by 90 from the previous year, it is noteworthy that, in fact, the number of small firms actually dropped by 91. (That number was offset by a slight increase in the number of mid-size firms, which is why the total is actually slightly less than the total for small firms.) This marks the fourth consecutive year in which the number of small firms has gone down. With that said, the overwhelming majority of FINRA members are small, almost 90% of the total (at least based on FINRA’s definition of “small.”)[1]

Number of IAs. FINRA breaks firms down into three categories: BD-only firms, IA-only firms, and dually-registered firms. According to the data,

  • The number of BD-only firms dropped for the ninth consecutive year
  • The number dually registered firms dropped for the ninth consecutive year
  • The number of IA-only firms increased for the ninth consecutive year

Consistent with these data, the number of BD-only registered representatives dropped again, while the number of IA-only and dually-registered registered representatives have both increased. Again.

I am not sure what else to say anymore, after being shown essentially the same picture three years in a row. The slow but steady reduction of BDs, the rise of IAs, and the particularly troubling demise of small BDs. If FINRA is interested in stopping any of this from happening, it sure hasn’t provided any evidence of such. It is tempting to draw, and frankly, pretty hard to argue with, the more obvious conclusion, which is that these figures are actually consistent with FINRA’s desires. If that’s true, then it is yet one more sad day for the industry.

[1] Once again, while FINRA disclosed the total revenue for all member firms, it refused to break that down by firm size. It is my opinion, again, that the reason for this is that it would show all-too-clearly that notwithstanding the fact that most firms are small, the industry’s revenues – and FINRA’s, as well – principally come from just a handful of big firms. By keeping this data secret, FINRA can continue to act as if no one firm is more important than any other.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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