FINRA: Broker numbers up for first time in years

FINRA's industry snapshot broke down the individual representatives by the size of the firms they worked at and their ages. Not surprisingly, most were likely to work at large firms, which FINRA defines as having 500 or more registered representatives. Roughly 83% of all reps, or 524,075 people, did so in 2022. 

Jon Henschen, the founder of the Henschen & Associates industry recruiting firm, said the number of people entering the industry slowed significantly during the COVID-19 pandemic and related lockdowns. It's not surprising, he said, that large firms have since emerged as the industry leaders in many ways.

"The larger firms' ability to offer considerably large transition notes along with a greater variety of services gives them a clear advantage on the recruiting front," Henschen said. "Larger firms are also more active in acquisitions of broker-dealers which accounts for a large portion of their growth."

By contrast, only 50,866, or 8% of the total, worked at medium-sized firms with between 151 and 499 representatives. And 62,076, or 9.7%, were at small firms with 150 or fewer reps. The number working at large firms rose by nearly 3% between the two years, whereas the figures for both medium-sized and small outfits both showed decreases. 

"Many smaller broker-dealers have had a tough go of it," Elzweig said. "Ever-escalating compliance and technology costs have proven challenging for many smaller broker-dealers."

Even though large firms employed the greatest number of representatives, they were relatively few in number. There were only 165 large firms in 2022, up barely from the 161 recorded the previous year. Small firms were far more prevalent, with a total of 3,021 in 2022. The number of medium-sized firms came in at 192.

After a string of years when the number of people leaving the industry topped the number coming in, that trend was reversed in 2022. The 38,236 representatives who departed in 2022 were outpaced by the 46,683 who joined. The last time more people entered the brokerage business than left was in 2015, when the 47,035 newcomers managed to make up for 43,776 departures.

Firms also opened more branch offices than they closed for the first time in many years. Brokerages and hybrids had 18,094 new branches in 2022, more than offsetting the 17,334 they closed. The last time the number of new offices outpaced closings was in 2014, when 17,522 were opened and 16,544 were shut down.

The total number of firms entering the industry, meanwhile, continued to be outpaced by departures. FINRA's report found that 116 firms opened their doors for the first time in 2022 and 132 shut down.

The four states with the greatest numbers of registered representatives were California, New York, Florida and Texas, each of which had more than 300,000 in 2022. 

The states with the most branch offices were nearly identical: California, New York, Florida, Texas, Illinois, Ohio and Pennsylvania. And New York state remained the most likely place for a firm to have its headquarters, with 951 principal offices in 2022. 

But the number of firms registered in three strongholds of the brokerage industry — New York, Connecticut and New Jersey — has been on a downward trend. In 2012, 1,495 had their main offices in those three states. By 2022, the figure had dropped to 1,207.