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FINRA Sees Sharper Decline in Reps While Dual-Registrant Numbers Continue to Rise

FINRA Sees Sharper Decline in Reps While Dual-Registrant Numbers Continue to Rise

The total number of FINRA-registered reps dropped by nearly 5,000 in 2019, a much more drastic decline than in 2018, according to a new FINRA report.

The total number of FINRA-registered representatives dropped even more significantly in 2019 than the year prior, according to an industry snapshot released by the regulatory agency this week.

In 2019, the number of reps dropped from 629,529 to 624,674, a total decline of 4,855. That compares with a drop of just 729 in 2018.

While the decline in registered reps was much more drastic, the latest statistics mark the continued decline of FINRA reps from as many as 669,797 in 2007, prior to the 2008 economic crash. 

But the average number of representatives per firm was up slightly from 175 to 179 from 2018 to 2019, a number that has continued to increase since 2015. Additionally, though the total number of FINRA-registered broker/dealer firms dropped from 3,607 to 3,517, the number of investment advisory firms regulated either by the Securities and Exchange Commission or by states rose from 30,246 to 30,535 last year.

Also, while the number of representatives registered only with broker/dealers continued to decline, the number of dual registrants continued its ascent, though at a far lower pace than the prior year. From 2018 to 2019, the number of dual registrants climbed by 1,069, compared with 7,866 from 2017 to 2018. 

The rise in dual registrants stems in part from a 2007 court decision mandating that broker/dealers could not provide fee-based accounts, leading many brokerage accounts to be transferred into investment advisory accounts, according to Ronald Rhoades, a professor and director of Western Kentucky University’s Financial Planning Program. Over time, this has led to a move away from commission-based compensation accounts and toward fee-based accounts. Though the change has primarily been driven by clients, Rhoades said brokers also wanted to make the transition.

“While many (mostly older) brokers still cling to product sales, many middle-career and newer brokers desire to promote themselves as fiduciaries to their clients,” he said. “Many brokers have left b/d firms to form their own RIA firms, and they often operate as hybrid advisors—sometimes for a limited number of years while they transition their clients away from 12b-1 fees and variable annuity trails.”

The percentages of individuals leaving and entering the industry remained fairly constant; 7% of representatives left the field in 2019, matching the previous four years, while 6% of the total number of representatives were new additions to the industry. The number of entrants per year has hovered between 6% and 8% since 2009. Overwhelmingly, both the number of representatives who left and entered the industry did so while working at large firms (defined as 500 or more total representatives).

The agency also catalogued the 10-year change of FINRA member firms from 2009 to 2019 in the New York tri-state area versus the rest of the country. According to the data, while the number of firms in New York, New Jersey and Connecticut fell 288 from 1,591 to 1,303, the total number of firms in all other states fell by 912, from 3,126 to 2,214.


TAGS: Industry
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