What a year. When we published last year's survey results, most independent broker-dealers were riding a wave of strong profits and revenues, buoyed in part by the burgeoning wealth of the baby boomers and their prodigious IRA rollovers. While the industry sensed a slowdown at the beginning of last year, there seemed to be a general feeling that not only could things be much worse, but advisors also actually had business opportunities for the taking.

Well, things did get worse, much worse. The extent of the economic turmoil in 2008 caught everyone by surprise. The Madoff scandal destroyed billions of dollars of wealth and the trust many people had in their advisors. Bear Stearns is gone; Lehman Brothers is gone; Bruce Bent is facing SEC charges over the disaster at The Reserve Fund. AIG, which staved off collapse through the largest federal bailout of a private company in history, is now trying to sell (among other assets) its three broker-dealers-FSC Securities Corp., Royal Alliance Associates and SagePoint Financial (formerly AIG Financial Advisors). All three are in the top 15 of the FP50—the 50 largest independent broker-dealers, as ranked by total revenues.

As we publish Financial Planning's 24th annual broker-dealer survey, it is worth noting that the global financial crisis has not resulted in a crisis of confidence among the executives we interviewed. There are certainly both subtle and substantial shifts in numbers and attitudes, but it often feels like the more things change, the more they stay the same.

Regulation, recruitment, consolidation and, yes, opportunity are the buzzwords this year. Revenue is also at the forefront of everyone's minds, but not necessarily on the tip of their tongues. Total revenues for the 91 firms participating in this year's Independent Broker-Dealer Survey—up from last year's record of 83—grew at a substantially slower rate of 9.9%. Even gloomier: The median revenue change for the FP50 is -4.5%.

But instead of wallowing in worry, the broker-dealers who spoke to Financial Planning are busy negotiating the downturn by improving their infrastructure, expanding through recruitment and eyeing an economic rebound.

"I don't think it's realistic to think we're going to grow in this environment," says Arthur Grant, president and CEO of Cadaret, Grant. "I think it is realistic to think we can improve the quality of the firm."

The New Normal

To put last year's -4.5% revenue result into perspective, by comparison, in 2007 total revenue grew 23.6% over the previous year. Additionally, while all but one firm in the 2008 FP50 (which reported B-Ds' 2007 results) had positive growth, only 11 firms in the top 50 this year increased their total revenues from 2007 to 2008.

"The market is our biggest challenge both directly and indirectly," says Ryan Diachok, vice president of marketing at Geneos Wealth Management, which experienced a 3.4% revenue dip. "Obviously, it directly affects our revenues, advisory fees and overall sales. Indirectly it has frozen clients, which in turn affects our advisors out in the field. Fear of what's coming next with the market has caused a lot of our advisors' clients not to want to do anything for the time being, which affects advisors' revenues."

LPL Financial widened its lead at the top of the list with revenues of nearly $2.6 billion, more than double that of the next closest company, Raymond James Financial Services, which brought in $1 billion. LPL was also one of just five FP50 firms to experience double-digit revenue growth (13.5%). The other four were Securian Financial Services (19.3%), UVEST (18.3%), NEXT Financial Group (15.5%) and Wachovia Securities Financial Network (14.0%).

LPL's performance and growth has been "a validation of the independent broker-dealer business model," according to Bill Dwyer, managing director and president of LPL Financial Independent Advisor Services. The company has added four new accounts for every one it closed. "We are looking to grab market share in this downturn, as we have during previous downturns," Dwyer says.

For most broker-dealers in the FP50, the expectations for growth have been humbled; a modest gain or slight loss was cause to exhale in relief, given market conditions. The fourth quarter was especially slow-"a cratering of activity," says Brian Murphy, president and CEO of Woodbury Financial Services. (Woodbury is part of insurer The Hartford, which qualified for TARP money as this issue was going to press.) The trend continued into the first quarter of this year. Commonwealth Financial Network's revenue is down 13% for the first four months relative to the first four months of 2008, reports John Rooney, managing principal. Woodbury has also been down the first few months of the year.