Securities Brokers
Industry Profile Report
Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters
Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.
Call Preparation Call Prep Questions, Industry Terms, and Weblinks.
Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.
Industry Profile Excerpts
Industry Overview
The 8,300 investment banking and securities brokerage companies in the US generate revenue through securities underwriting and origination, managing securities markets, brokering securities for clients, and buying and selling securities on their own accounts. Firms charge asset management fees, earn commissions and transaction fees on client trades, and earn net interest revenue (difference between interest earned and brokerage interest expense) and fees for providing financial planning and advisory services. Firms may also receive “payment for order” for directing trades through a particular exchange or channel.
Regulated Environment
Investment banks and securities brokerages are highly regulated at the federal and state level.
Cyclical Performance
The investment banking and securities brokerage industry is cyclical with performance tied to the stock markets and influenced by domestic and global economic factors.
Growth in Self-directed Investors and Online Brokerage
The popularity of self-directed and online trading continues to grow, driven by investors’ increasing desire for control.
Industry size & Structure
The average investment banking and securities brokerage firm operates out of two to three locations, employs 54 workers, and generates $36 million annually.
- The investment banking and securities brokerage industry includes 8,300 firms that employ about 451,000 workers and generate about $296 billion annually.
- The industry is highly concentrated; the top 50 companies account for over 85% of industry revenue.
- Large investment banking companies include Morgan Stanley, Goldman Sachs, JP Morgan Chase, Bank of America, and Vanguard. Large securities brokerage firms include Charles Schwab, TD Ameritrade, StoneX, and Merrill Lynch. Large firms may have a global presence.
Industry Forecast
Securities Brokers Industry Growth
Recent Developments
Nov 14, 2024 - Investment Banking Revenue Increases
- Citigroup, Bank of America, and Goldman Sachs reported that their third quarter investment banking businesses’ revenue increased 44%, 18%, and 20% year over year, respectively. JPMorgan Chase and Wells Fargo reported increases of 30% and 37% from a year earlier. Goldman Sachs said that third-quarter fees from advisory assignments — bankers providing clients advice on complicated deals such as restructuring and acquisitions — increased 5% from a year earlier and 27% from the prior quarter. Equity and debt underwriting revenue at Goldman increased a respective 25% and 46% year over year.
- Securities and Exchange Commission (SEC) Chair Gary Gensler warned investment advisors and broker-dealers in early September about “AI washing,” a term used to describe the making of over-inflated claims about the use of AI. “Companies should ask themselves some basic questions, such as if we're discussing artificial intelligence in our earnings calls or having extensive discussions with our board of directors, maybe this information is potentially material to our business and to investors,” Gensler said. “Investment advisors, broker-dealers also should not mislead the public by saying they're using AI when they're not, nor say that they're using it in a particular way and not do so.” AI washing could violate securities laws, he noted. The September message follows at least three cases that the SEC has filed this year against companies alleged to have engaged in AI washing, including two against financial services companies. The SEC settled charges in March against two investment advisors – Delphia and Global Predictions – for $400,000. Those firms allegedly mischaracterized or made untrue statements to clients about their use of AI.
- The US Securities and Exchange Commission (SEC) issued a notice of proposed rulemaking that would require SEC-regulated investment advisers, investment companies, and broker dealers to notify individuals affected by certain types of data breaches, along with other related requirements. The SEC currently does not require covered entities to notify affected individuals in the event of a data breach. Covered entities generally respond to data breaches according to applicable state data breach notification laws. The proposal would also require covered institutions to develop, implement, and maintain written policies and procedures for an incident response program that is reasonably designed to detect, respond to, and recover from unauthorized access to or use of customer information. A response program would include procedures to assess the nature and scope of any incident and to take appropriate steps to contain and control the incident to prevent further unauthorized access or use.
- Investment banking and securities brokerage industry employment decreased slightly and average wages for nonsupervisory employees increased slightly during the first nine months of 2024, according to the US Bureau of Labor Statistics (BLS). Investment bankers and securities brokers slightly increased their prices during the first nine months of 2024, according to the BLS.
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