Securities Brokering in The US Industry Report

INDUSTRY REPORT 52312
Securities Brokering in the US
Bad investment: Investor uncertainty is expected to cause industry revenue

declines
Nick Masters | October 2019
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Securities Brokering in the US October 2019
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Contents
ABOUT THIS INDUSTRY..................................3 COMPETITIVE LANDSCAPE.......................... 22
Industry Definition............................................................ 3 Market Share Concentration........................................... 22
Supply Chain..................................................................... 3 Key Success Factors...................................................... 22
Major Players.................................................................... 3 Cost Structure Benchmarks...........................................24
Main Activities.................................................................. 3 Basis of Competition...................................................... 25
Similar Industries.............................................................. 3 Barriers to Entry.............................................................. 25
Related International Industries........................................ 4 Industry Globalization..................................................... 26
AT A GLANCE...................................................5 MAJOR COMPANIES......................................27

Key Statistics Snapshot.................................................... 5 Major Players.................................................................. 27
Key Trends........................................................................ 5 Other Companies............................................................ 31
SWOT in the Industry........................................................ 5
Executive Summary.......................................................... 5 OPERATING CONDITIONS........................... 32
Industry Structure............................................................. 6
Key Industry Data..............................................................7 Capital Intensity.............................................................. 32
Major Players.................................................................... 8 Technology & Systems................................................... 33
Products & Services Segmentation.................................. 8 Technology & Systems................................................... 34
Revenue Volatility........................................................... 34
INDUSTRY PERFORMANCE.............................9 Regulation & Policy......................................................... 35
Industry Assistance........................................................ 36
Key External Drivers.......................................................... 9
Industry Performance..................................................... 11 KEY STATISTICS.............................................37
Industry Data Timeseries................................................13
Industry Data.................................................................. 37
INDUSTRY OUTLOOK................................... 14 Annual Change............................................................... 37
Key Ratios....................................................................... 37
Revenue Outlook.............................................................15 Industry Financial Ratios................................................ 38
Industry Life Cycle.......................................................... 15 Additional Resources......................................................39
Products & Services Segmentation................................ 16 Industry Jargon...............................................................39
Supply Chain................................................................... 16 Glossary..........................................................................39
Products & Services........................................................16
Demand Determinants.................................................... 18
Major Markets................................................................ 19
International Trade......................................................... 20
Business Locations........................................................ 20
Legend
Icons are used throughout the report to indicate impact on the industry.
Negative impact
Neutral impact
Positive impact
About This Industry

Industry Definition Companies in this industry act as agents that arrange transactions between securities buyers and sellers
on a commission or transaction-fee basis. The Securities Brokering industry continues to converge with
various other securities and banking industries due to regulatory, technological and market trends.
Supply Chain Supply Industries Demand Industries
Telecommunication Networking Equipment - Portfolio Management

Manufacturing
- Retirement & Pension Plans
Computer Manufacturing
- Open-End Investment Funds
Communication Equipment Manufacturing
Private Equity, Hedge Funds & Investment
-
Data Processing & Hosting Services Vehicles
Internet Service Providers - Consumers
Wired Telecommunications Carriers
Stock & Commodity Exchanges
Major Players Bank of America
Wells Fargo
Charles Schwab
Morgan Stanley
Main Activities The primary activities of this industry are:
Securities (e.g. stocks, bonds, currencies, derivatives and options) brokerage
Mutual fund sales
Margin lending
The major products and services in this industry are:
Brokering and dealing - debt instruments
Brokering and dealing - equities
Brokering and dealing - derivative contracts
Brokering and dealing - mutual funds
Trust services - fiduciary fees
Financial planning and investment management services
Other products supporting financial services - fees
Similar Industries 52311 - Investment Banking & Securities Dealing in the US
Companies in this industry primarily provide securities underwriting, financial advisory and various trading
services, including brokerage services, to clients.
52391 - Venture Capital & Principal Trading in the US
Companies in this industry primarily buy and sell financial contracts (e.g. securities) on their own account.
52393 - Financial Planning & Advice in the US
Companies in this industry primarily provide financial planning and advice services, but may also offer
securities brokerage services.
52315 - Commodity Dealing and Brokerage in the US
Companies in this industry act as brokers and/or dealers for financial derivatives in commodity markets.
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Related International J5521-GL - Global Investment Banking & Brokerage

Industries This industry covers global investment banking and brokerage activities. Operators provide a diverse range
of securities services, including investment banking and broker-dealer services. Operators also offer
banking and asset management services and engage in proprietary trading, such as trading their own
capital for a profit.
K6411a - Investment Banking and Securities Brokerage in Australia
Industry operators provide investment banking and brokerage services. Brokerage services include trading
stocks, shares or other financial assets on a commission or transaction fee basis. Investment banking
services include corporate finance and advisory services, underwriting and principal trading.
6920 - Securities Brokerage and Transaction Services in China
The Securities Brokerage and Transaction Services industry in China is mainly engaged in securities and
futures brokerage and transaction services, including securities and fund management and the
management of securities business departments.
K66.120 - Security & Commodity Contracts Brokerage in the UK
Brokers in the Security and Commodity Contracts Brokerage industry deal in financial markets on the
behalf of others. This includes securities and commodity contracts brokerage, as well as the activities of
bureaux de change. Industry operators do not deal in markets on their own account or manage portfolios.
K6411NZ - Financial Asset Broking Services in New Zealand
The industry consists of enterprises mainly engaged in trading stocks, shares or other financial assets on
behalf of others, or engaged in underwriting financial asset issues. The industry also includes operators
mainly engaged in buying, selling and trading in mortgage documents for others.
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At a Glance
Key Statistics Total Revenue Annual Growth Annual Growth
Snapshot 2019 2014-2019 2019-2024
$157.3bn 0.7% -0.1%

Profit Margin Wages as a share of Revenue Number of Businesses
2019 2019 2014-2019
12.8% 38.3% 1.5%
Key Trends Industry consolidation helped the top four industry leaders expand their client AUM
The industry has managed to offset declines by increasingly adopting value-added services
Changes to trade execution systems opened the door to new entrants and higher competition
Increased oversight will improve investors' confidence in full-service brokerages
Brokers have increasingly moved to a fee-based structure
Online brokerage firms are expanding into banking products
SWOT in the
Industry
Strengths Weaknesses Opportunities Threats
Low Imports None & Steady Level of High Revenue Growth Low Revenue Growth
Assistance (2019-2024) (2005-2019)
Low Product/Service
Concentration High Competition Investor uncertainty Low Revenue Growth
(2014-2019)
Low Capital Requirements Low Profit vs. Sector
Average Low Outlier Growth
High Customer Class Low Performance Drivers

Concentration
Demand from open-end
Low Revenue per investment funds
Employee
Executive The Securities Brokering industry primarily serves as an intermediary

Summary
between investors and investment securities such as stocks, bonds
and derivatives.
Brokerage firms match a client's buy order with a third party's sell order or fulfill the client's order with their
own investment products. The industry generates revenue from trading commissions as well as
transaction and asset-based fees. With the rise of electronic trading and discount brokering, many industry
operators have started to offer more value-added services such as investment advice for clients. As a
result, the industry has become increasingly indistinguishable from the Financial Planning and Advice
industry (IBISWorld report 52393).
Over the five years to 2019, industry revenue is expected to increase an annualized 0.7% to $157.3 billion.
Slow economic and financial market recovery, coupled with contracting securities trading volumes, caused
revenue to drop in 2015 before slowly starting to improve. Moreover, the average industry profit margin
has also been constrained due to intense competition from online trading platforms that eliminate the
need for financial intermediaries. Operators have responded to this trend by increasing their financial
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services offerings and transitioning to an asset-based fee structure characteristic of the Financial Planning
and Advice industry. Consequently, securities brokering remains lucrative, with profit, defined as earnings
before interest and taxes, comprising an estimated 12.8% of industry revenue in 2019. Furthermore, rising
household income and corporate profit have bolstered trading volumes over the past five years, and
continued growth is projected to increase industry revenue 1.1% in 2019.
Over the five years to 2024, industry revenue is forecast to decline an annualized 0.1% to $156.3 billion.
Following many years of growth, the industry's lackluster prospects stem from increasing investor
uncertainty in 2019. External factors such as the US-Sino trade war, monetary policy changes and global
growth concerns serve to lessen investor appetite for risky assets. Nevertheless, economic fundamentals
are expected to remain stable over the next five years. Thus, industry revenue is expected to stagnate due
to the highly uncertain nature of the aforementioned external factors as well as the upcoming 2020
presidential election.
Industry Structure Level Trend Level Trend
Life Cycle Mature Regulation Level Heavy Steady
Revenue Volatility Medium Technology Change High
Capital Intensity Low Barriers to Entry Medium Steady
Industry Assistance None Steady Industry Globalization Low Steady
Concentration Level Low Competition Level High Increasing
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Key Industry Data
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Major Players
Products & Services

Segmentation
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Industry Performance
Key External Drivers
o Demand from open-end investment funds
Open-end funds, which include mutual funds and exchange-traded funds, are investors' primary access
channel to diverse markets. Therefore, demand for securities brokerage services is closely tied to
investor demand for open-end funds. Increases in the number of these funds and the range of assets they
offer boosts trade volumes and therefore industry revenue. Demand from the Open-End Investment Funds
industry (IBISWorld report 52591) is expected to rise in 2019.
o Investor uncertainty
Rising investor uncertainty negatively affects the level of trading in financial instruments. In the short
term, rising investor uncertainty over economic conditions boosts trading volumes as investors seek to
limit their losses or exit investments. However, over the long term, prolonged investor uncertainty drives
investors away from financial markets. Investor uncertainty is expected to decrease in 2019.
o S&P 500
The performance of the stock market affects institutional and retail investor trading. Retail investors, or
individuals who trade for their own personal account instead of for an organization, are more active in the
stock market when it is performing successfully because they perceive opportunities for high returns with
low risk. Higher stock prices also cause the value of client assets held by brokerage firms to increase,
driving up industry revenue from asset-based fees. The S&P 500 index is expected to rise in 2019,
presenting a potential opportunity for the industry.
o Personal savings rate
The personal savings rate is an indicator of the amount of US retail investor savings available for
investment in securities markets. Higher investment savings supplies more money to financial markets,
increasing demand for industry services. When the level of savings falls, demand for brokerage services
and industry revenue consequently declines. The personal savings rate is expected to increase in 2019.
o Regulation for the Investment Management industries
New regulations or changes in existing rules enforced by the US Securities and Exchange Commission
may adversely affect industry operators by disrupting their business activities and hurting their profit
margins through higher compliance costs. Other US or international governmental, regulatory or self-
regulatory authorities could also add new regulations or modify existing rules. Regulation for the
investment management sector is expected to remain high in 2019, presenting a potential threat to the
industry.
o Yield on 10-year Treasury note
Brokerages generate revenue from the interest earned on securities and interest paid for investor funds.
Consequently, a gradual rise in interest rates will lead to higher industry revenue. Interest rates also affect
the value of securities, which influences investors' portfolio preferences across asset classes such as
stocks and bonds, thereby indirectly affecting brokers' trading commission revenue. The yield on the 10-
year Treasury note is expected to decrease in 2019.
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Industry Performance Securities brokerages offer a wide range of services including the
brokering and dealing of stocks, fixed income securities and
investment funds such as mutual funds and exchange traded funds.
Moreover, securities brokerage operations have become intertwined with wealth management operations,
which provide services such as investment advisory and asset management.
Overall, the Securities Brokering industry is characterized by two types of brokerage operations: full-service
brokerages and discount brokerages. Full-service brokerages are typically divisions of large multinational
banks and primarily market to high-net-worth individuals. Conversely, discount brokerages provide
investing services online and through brick-and-mortar branches; discount brokerages typically market to a
wider range of clientele due to their vast array of investment products and services suited to multiple
investor profiles.
The industry's financial performance is largely dependent on investor sentiments and capital market
levels. Generally, the investing public is more apt to seek out investment services during periods of steady
economic growth. Conversely, sustained periods of stock market declines and volatility decreases
individuals' propensity to invest. Overall, the substantial increase in capital market levels over the past five
years has largely driven demand for brokerage and wealth management services. In turn, industry revenue
is forecast to grow an annualized 0.7% to $157.3 billion over the five years to 2019, including expected
growth of 1.1% in 2019 alone.
Root causes of the industry's shift to asset-based fees
To understand how the Securities Brokering industry has fundamentally changed during the five-year
period, it is helpful to explain the root causes of the industry's continued integration with wealth
management services. When the housing bubble burst in 2008, the subprime mortgage crisis caused
significant declines in clients' asset values and securities trading volumes. As the financial sector stood
on the brink of collapse, unprecedented government intervention and stimulus restored access to capital
and credit. Nevertheless, brokerage firms with the highest exposure to mortgage-backed securities had
already suffered tremendous losses, spreading turmoil throughout the industry. Lehman Brothers Holdings
Inc. filed for bankruptcy, and the last unregulated investment banks, Morgan Stanley and The Goldman
Sachs Group Inc., converted to bank holding companies to be overseen by the Federal Reserve.
Consolidation activities stemming from the credit crisis include the Bank of America Corporation's
acquisition of Merrill Lynch; JPMorgan Chase and Co.'s acquisition of the Bear Stearns Companies Inc.
and Washington Mutual Inc.; Wells Fargo and Company's acquisition of Wachovia; and Morgan Stanley's
joint venture with, and ultimate acquisition of, Citigroup Inc.'s retail brokerage operation, Smith Barney,
now Morgan Stanley Wealth Management.
Since the recession, the volume of securities trading has decreased, particularly in equities on which
brokerages heavily depend. According to Investment Technology Group Inc., average daily trading volume
for US stocks still has not recovered from its peak in 2008, as a result of decreased high-frequency trading
activity, rising investment in passive investment funds, such as index funds and some exchange traded
funds (ETFs), and increased restrictions on investment banks' trading activities. This decline in demand
has intensified price competition, particularly as electronic trading and discount brokering increased
pressure on full-service brokerages to lower trading commissions. Furthermore, the 2010 Dodd-Frank Wall
Street Reform and Consumer Financial Protection Act raised compliance costs across financial-related
industries. Lower trading volumes and commissions, in addition to higher compliance costs, have resulted
in lackluster growth relative to previous periods. However, despite these challenges, revenue has
increased since 2014 due to strengthening stock market values, with the S&P 500 increasing an
annualized 8.1% over the five years to 2019.
Changes in technology and regulations are continuing to transform industry operations, driving
consolidation as well as product and service innovation. The repeal of the Glass-Steagall Act in 1999 tore
down barriers between banking, securities and insurance firms; spurred consolidation across the Financial
Activities sector; and led to the development of large, full-service financial conglomerates. This repeal
intensified competition and put downward pressure on industry prices. At the same time, new electronic
trading technologies for generating, routing and executing securities orders were driving changes in the US
financial market structure, boosting the speed and volume of worldwide securities trading and lowering
trading costs (see IBISWorld report 52321, Stock and Commodity Exchanges in the US). These trends,
accelerated by the downturn prior to the period, led to the development of larger, full-service firms in which
securities brokerage is a shrinking share of overall revenue.
Eliminating the middle man
Information technology changes to trade execution systems in the late 1970s opened the door to new
entrants and higher competition. As a result, trading commissions and the role of brokers in executing
trades diminished. The increasing role of technology within the industry has resulted in increased
competition for the Securities Brokering industry. In particular, the growth of alternative trading systems
(ATS) is an important area where improvements in electronic trading systems have hurt securities
brokerage revenue by eliminating the need for brokers. Disintermediation, or the withdrawal of funds from
intermediary financial institutions to invest them directly, significantly threatens the industry, with ATS
platforms and some traditional exchanges offering institutional investors the opportunity to match trades
without using a broker as an intermediary. Disintermediation increases the pressure to reduce prices and
makes the role of securities brokers less relevant.
Many new ATS platforms have entered the market to compete with traditional exchanges. Some of these
electronic exchanges have the financial backing of large financial institutions, which are not only the
owners but also the users of these trading systems. Many of these systems have very low-cost structures
and seek to attract volume by offering competitive pricing and fast trading at the short-term expense of
revenue and profit. According to the US Securities and Exchange Commission, trading on ATS platforms
accounts for 18.0% of the total volume of US equities trading, up from 4.0% in 2005. In response, brokers
are increasingly providing additional value-added services along with trade execution.
Evolving broker activities and greater integration with wealth management
To counter their shrinking role in executing trades, securities brokers have moved into the sphere of
financial advisory and investment management services (see IBISWorld report 52393, Financial Planning
and Advice in the US). The distinction between the services provided by financial advisers and brokers is
becoming less apparent as industry revenue generated from financial advice and asset management
continues to increase. Brokers have adopted a fee-based structure, under which customers are provided a
bundle of brokerage and financial advisory services for either a flat fee or a fee based on assets in the
account. Industry consolidation following the subprime mortgage crisis helped the top four industry
leaders expand their client assets under management (AUM) through mergers and acquisitions. Discount
and online brokers, such as the Charles Schwab Corporation and TD Ameritrade, also expanded their AUM
during the period in line with rising market values. As a result, revenue generated by asset-based fees
continues to grow as a percentage of total revenue, while traditional trade commission revenue declines.
Industry operations
Following the consolidation of some of the largest financial institutions in the country, the number of
industry participants declined drastically during the early part of the five-year period. However, in more
recent years, financial markets have exhibited strong growth, with the S&P 500 increasing 11.3% in 2018
alone. As a result, investor uncertainty has declined and trading activity among retail investors has
increased. Improved market conditions and decreased investor uncertainty have caused the number of
enterprises to increase at an annualized rate of 1.5% to 28,145 companies in 2019.
Moreover, as execution systems have become more advanced, the industry has increasingly invested in
software engineers and information systems specialists to develop and maintain operations. Over the five
years to 2019, increased value-added services, such as asset management and advisory services, have
resulted in industry wages growing at an annualized rate of 2.0% to $60.2 billion.
The average industry profit margin, measured as earnings before interest and taxes is projected to
decrease marginally to 12.8% of industry revenue in 2019, down from 13.9% in 2014. Although greater
competition resulting from the rise of discount brokers and electronic trading systems has constrained
profit over the past five years, the industry has managed to offset declines by increasingly adopting value-
added services. In addition to increased competition, higher prices for trading services have also
contributed to lackluster growth in industry profitability, as stock exchanges have increasingly
consolidated and shifted from being privately owned to being public for-profit structures. With only three
major players (New York Stock Exchange, NASDAQ and the Chicago Mercantile Exchange), exchanges
have substantial liberties in setting prices and raising trading fees.
Industry Data Revenue IVA Estab. Enterprises Employment Exports Imports Wages
Domestic
Demand S&P 500
Timeseries ($m) ($m) (Units) (Units) (Units) ($m) ($m) ($m) ($m) (Index)
2000 214,546 104,737 48,970 27,456 397,139 N/A N/A 69,766 N/A 1,420
2001 173,889 99,584 49,715 27,221 400,571 N/A N/A 68,806 N/A 1,186
2002 153,298 93,441 53,058 28,152 463,439 N/A N/A 67,533 N/A 989
2003 158,214 88,522 57,082 28,461 396,755 N/A N/A 57,196 N/A 968
2004 163,726 94,910 54,476 28,719 376,142 N/A N/A 58,236 N/A 1,134
2005 174,000 89,332 49,579 28,560 346,453 N/A N/A 58,012 N/A 1,208
2006 197,862 96,280 48,789 27,459 358,991 N/A N/A 62,841 N/A 1,318
2007 193,859 101,470 47,453 27,637 342,613 N/A N/A 64,831 N/A 1,478
2008 85,784 78,899 54,415 27,511 394,274 N/A N/A 67,576 N/A 1,215
2009 141,259 74,150 59,239 27,051 372,110 N/A N/A 49,571 N/A 948
2010 137,876 73,654 56,880 26,665 327,814 N/A N/A 54,903 N/A 1,131
2011 139,316 78,570 55,033 26,092 319,798 N/A N/A 55,722 N/A 1,281
2012 138,719 74,919 60,580 27,066 326,118 N/A N/A 50,921 N/A 1,386
2013 143,941 73,403 59,674 25,905 308,139 N/A N/A 50,804 N/A 1,652
2014 152,005 76,881 56,284 26,099 305,198 N/A N/A 54,536 N/A 1,944
2015 149,309 77,495 54,071 25,356 310,843 N/A N/A 55,397 N/A 2,052
2016 148,877 76,833 55,594 25,970 314,526 N/A N/A 54,204 N/A 2,106
2017 156,323 80,077 59,132 27,443 326,547 N/A N/A 58,661 N/A 2,460
2018 155,540 80,741 59,961 27,803 326,473 N/A N/A 59,625 N/A 2,738
2019 157,259 81,562 60,717 28,145 329,681 N/A N/A 60,225 N/A 2,864
2020 155,643 80,833 60,506 28,074 327,547 N/A N/A 59,789 N/A 3,023
2021 155,431 80,787 60,571 28,134 327,930 N/A N/A 59,829 N/A 3,008
2022 155,672 80,987 61,007 28,348 329,390 N/A N/A 60,061 N/A 3,103
2023 155,958 81,240 61,696 28,682 331,051 N/A N/A 60,325 N/A 3,276
2024 156,296 81,502 62,312 28,981 332,634 N/A N/A 60,582 N/A 3,453
Industry Outlook
Over the five years to 2024, Securities Brokering industry revenue is
projected to decline as a result of decreasing investor sentiment.
In particular, a projected increase in investor uncertainty and slowing growth of domestic market indexes
will cause investors to shift away from the securities markets and thereby reduce industry commissions
and fees. While initially driving away retail investors, or individuals who trade for their own account,
financial market volatility will ultimately result in higher demand for investment advice to both protect and
build wealth. As a result, the offsetting effects of increased market volatility and, therefore, investor
uncertainty, will cause industry revenue to exhibit slowed growth. During the five-year period, IBISWorld
expects growth in the Securities Brokering industry to be primarily driven by wealth management services
as asset-based fees represent a less-volatile revenue stream for industry operators.
Over the next five years, several long-term trends will mitigate the effects of increased investor uncertainty,
including expected growth in the personal savings rate and demand from open-end investment funds. As
market volatility increases, retail investors will shift to safer asset classes such as fixed income (i.e.
bonds) and passive index funds. Moreover, fixed income securities will become more attractive to
investors as the yield on the 10-year treasury note continues to increase. In addition, US investors will be
attracted to overseas securities due to the continued globalization of financial markets, cross-border
mergers of stock exchanges and the prospect of strong growth in emerging markets. Ultimately, a shift
toward fixed income securities and continued growth in open-end investment funds, which provide retail
investors with access to diverse markets, will largely offset the effects of higher market volatility and
investor uncertainty. As a result, industry revenue to decline at an annualized rate of 0.1% to $156.3 billion
over the five years to 2024.
Embracing a new structure
Brokers have increasingly moved to a fee-based structure, under which customers are provided a bundle
of brokerage services for either a flat fee or a fee based on assets in the account. The move toward asset-
based fees, rather than commissions, will provide a more stable revenue flow from retail investors, since
asset-based fees are charged whether or not trading occurs. Revenue generated by trading commissions
will continue to decline as a share of total revenue over the five years to 2024, as the execution of trades
will become one of a range of services provided to customers. As a result, the blurring between the roles
of brokers and financial advisers will increase. This trend is discernible in the activities of online brokerage
firms, which are no longer concerned solely with providing discount brokerage on a commission basis.
Online brokerage firms are expanding into banking products and increasingly linking their services with
financial advisers. For example, TD Ameritrade has expanded its brick-and-mortar locations in an effort to
shift toward consumer banking and build out its client-facing advisory services. Moreover, independent
registered investment advisers (RIAs) are expected to gain momentum. Investor demand for RIAs is
expected to increase because investors perceive independent advisers as unbiased on particular financial
products and more likely to produce high returns. Consequently, independent, nonemployer advisers are
projected to increase as a percentage of total brokers. Over the five years to 2024, the number of
enterprises is forecast to grow an annualized 0.6% to 28,981 companies. However, industry employment is
expected to remain relatively stable, rising an annualized 0.2% to 332,634 workers over the five years to
2024. Despite more independent and small-sized brokers entering the industry, larger players will continue
to expand the scope of their operations through mergers and acquisitions.
Regulatory environment
Under the 2010 Dodd-Frank Wall Street Reform and Consumer Financial Protection Act, the Securities and
Exchange Commission (SEC) has the power to regulate broker-dealers trading on behalf of their financial
advisory clients. Investment advisers are subject to more stringent requirements under the Investment
Advisers Act of 1940, including a fiduciary duty to act in the best interests of their clients and fully disclose
conflicts of interest that could induce bias in their recommendations. In comparison, broker-dealers are
subject to a more flexible suitability standard under the Securities Exchange Act of 1934, which merely
requires them to make recommendations that meet investors' needs and objectives. The SEC is
considering whether or not it will impose a fiduciary duty on broker-dealers when they provide personalized
financial advisory services for fear that the rule could limit the number of full-service brokerage accounts
offered to retail investors. However, in 2015, the Department of Labor announced its own proposal to
implement a fiduciary rule for brokers advising on retirement accounts. A partial portion of the rule went
into effect on June 9th, 2017, with the entire version having gone into effect during January 2018.
Although tightened regulatory standards might deter some operators from offering financial advisory
services to retail clients, increased oversight of this market will improve investors' confidence in full-
service brokerages, therefore boosting demand for the segment. Overall, industry profit, measured as
earnings before interest and taxes, is expected to remain relatively stable at 12.7% over the five years to
2024.
Revenue Outlook Revenue IVA Estab. Enterprises Employment Exports Imports Wages
Domestic
Demand S&P 500
($m) ($m) (Units) (Units) (Units) ($m) ($m) ($m) ($m) (Index)
2019 157,259 81,562 60,717 28,145 329,681 N/A N/A 60,225 N/A 2,864
2020 155,643 80,833 60,506 28,074 327,547 N/A N/A 59,789 N/A 3,023
2021 155,431 80,787 60,571 28,134 327,930 N/A N/A 59,829 N/A 3,008
2022 155,672 80,987 61,007 28,348 329,390 N/A N/A 60,061 N/A 3,103
2023 155,958 81,240 61,696 28,682 331,051 N/A N/A 60,325 N/A 3,276
2024 156,296 81,502 62,312 28,981 332,634 N/A N/A 60,582 N/A 3,453
Industry Life Cycle The life cycle stage of this industry is Mature
NOTE
Key Considerations: An industry's life cycle stage is determined by multiple factors, such as IVA vs. GDP performance and establishment
growth. Other qualitative factors must also be considered, which mean that the indicative life cycle stage shown above may not reflect the
industry's actual life cycle stage as determined by the analyst. Please refer to the below analysis for more information.
Life Cycle Reasons The Securities Brokerage industry is mature, indicated by technological change, declining profitability and
o Industry value added is growing
increasing regulation. Developments in electronic trading platforms and the widespread use of the internet
slower than GDP lowered barriers to entry within the industry, resulting in higher competition and lower commission rates.
o Industry profitability is declining Since then, commissions have declined as a share of industry revenue as fee-based structures become
o The industry is becoming more
more prominent. Industry value added, or contribution to the overall economy, is anticipated to increase at
reliant on asset-based fees rather an annualized rate of 0.6% over the 10 years to 2024. In comparison, GDP is projected to grow at a faster
than commissions annualized rate of 2.1% during the same period.
While the share of revenue generated from securities brokerage activity has declined, industry players
have grown by offering services traditionally provided by companies in other industries, primarily in the
Financial Planning and Advice industry (IBISWorld report 52393). Asset-based fees are growing in
importance, as is revenue from wealth management and retail banking services provided to brokerage
clients. Through mergers and acquisitions, financial services firms are seeking greater economies of scale
and providing more value-added services to increase revenue.
Products & Services Segmentation

Supply Chain
Products & Services
Commissions and transaction fees
The majority of industry revenue is derived from the commission and transactions fees generated by the
brokering of securities products. In particular, commissions and transaction fees represent the fees
charged to retail investors, traders and registered investment advisers (RIAs) for the buying and selling of
securities (stocks, bonds and exchange traded funds). Although the leading source of industry revenue for
securities brokerages, commissions and transaction fees share of total industry revenue has declined as a
result of the proliferation of online discount brokerages and the increasing role of wealth management
services. For example, securities brokerage Fidelity Investments charges $32.95 for a representative-
assisted trade and $4.95 for an online trade. Given the low product-differentiation between the two
services, consumers have increasingly turned to online brokerage platforms to buy and sell securities.
Overall, IBISWorld estimates commissions derived from brokering and dealing securities to account for a
combined 60.8% of industry revenue in 2019.
Financial planning and investment management services
Wealth management services include investment advisory and management and trust services. Generally,
wealth management services are targeted to high-net-worth individuals. For example, major player Bank of
America serves clients with at least $250,000 in investable assets through its Global Wealth and
Investment Management segment (consisting of subsidiaries Merrill Lynch and US Trust) while clients
with less than the aforementioned amount are served by the bank's Consumer Banking segment. Overall,
wealth management services have grown in significance among securities brokerages as wealth
management operations have become more profitable than securities brokering alone given adequate
client balances (often referred to as assets under management). Therefore, wealth management services
have become increasingly intertwined with the brokering and dealing of securities and their share of
industry revenue has increased over the past five years. IBISWorld expects wealth management's share of
industry revenue to account for a combined 29.7% of industry revenue in 2019.
Other
Investment product fees generally consists of fees collected on third-party and proprietary investment
products such as mutual funds and exchange traded funds. Clearing and execution fees represent the fees
collected from other brokerage and advisory operations for use of a brokerage's account clearing system.
IBISWorld estimates revenue generated from investment product fees and other miscellaneous fees to
account for 9.5% of industry revenue in 2019.
Demand Determinants Demand for securities brokering services is primarily determined by

investors' willingness to invest their wealth into capital markets.
Investor uncertainty is a proxy measure of investors' willingness to take risks, based on their assessment
of the market. Demand for securities brokerage services increases when uncertainty is low and investors
are willing to invest more money in capital and commodity markets. Macroeconomic factors such as real
GDP growth, the level of employment and disposable income, and corporate earnings generally fuel
investor confidence.
A key indicator of investor funds available is the personal savings rate, which decreased over the past five
years. The level of interest rates is also important because stocks generally look more attractive than
bonds and other investments during periods of low interest rates. During such times, investors are also
more likely to increase their level of margin borrowing. Therefore, the level of funds they have available to
invest in the stock market is higher.
Another determinant of demand for securities brokerage services is the perceived and actualized returns
on securities relative to alternative investments such as real estate. A principal indicator of the returns on
securities is trading volume on the S&P 500 index. The volume of trading depends on several factors,
including household equity ownership and stock market performance. As more US households own
stocks, bonds and mutual funds, their level of interest in buying and selling securities goes up.
Major Markets
Retail investors
Retail investors represent the largest market for the Securities Brokering industry. The retail investors
market is generally broken down into two subsegments: individuals with under $250,000 in investable
assets and individuals with over $250,000 in investable assets. The needs of the former group of retail
investors are generally met with the services provided by online discount brokerages (i.e. Merrill Edge)
whereas the needs of the latter group of investors generally require the additional advisory and
management services provided by full-service brokerages (i.e. Merrill Lynch Wealth Management). Overall,
IBISWorld estimates retail investors to account for 53.9% of industry revenue in 2019.
Professional investors (noninstitutional)
Professional investors represent day-traders and independent registered investment advisers (RIAs).
Institutional investors such as hedge funds, endowments and pension funds are served by prime
brokerages that operate within the Investment Banking and Securities Dealing industry (IBISWorld report
52311). Nevertheless, professional investors such as day-traders and RIAs typically demand more
sophisticated investment products than those offered to retail investors. In particular, brokerages that
appeal to this market offer advanced trading software, an array of investment products and derivatives as
well as advanced execution and clearing services. In particular, industry operators TD Ameritrade and
Interactive Brokers offer a range of investment products and services catered to this market. For example,
Interactive Brokers offers investors access to 120 securities and derivatives markets in 31 countries as
well as a full suite of trading platforms and interfaces. Overall, IBISWorld expects professional investors to
account for 46.1% of industry revenue in 2019.
International Trade Exports in this industry are Low and Steady
Imports in this industry are Low and Steady
The Securities Brokering industry is services-based; therefore, trade is not applicable. While industry
services can involve brokering transactions for consumers worldwide in global financial markets, industry
revenue in this report reflects revenue generated from US-based enterprises and establishments.
Business Locations
In general, establishments for the Securities Brokering industry in the United States align with the
distribution of major business and financial hubs and the general population. One exception to this, on a
per capita basis, is the disproportionately larger number of establishments located in the Great Lakes,
Plains and Rocky Mountains regions. This pattern may be attributed to the moderate barriers to entry and
the large number of nonemployer establishments associated with this industry. Discount brokerage
services have increasingly used independent financial planning and wealth management advisers who
experience lower barriers to entry and costs closer to their customers in the Great Lakes, Plains and Rocky
Mountains regions.
The Southeast has the largest number of establishments in this industry with 23.5% of businesses. The
high concentration of establishments in this region may be attributed to the population levels and
corporate business activities. The Southeast has 25.7% of the country's population. The general
population in a region is a material factor in this industry because they are the retail investors that
consume financial products. To raise and sell securities, investment banking and securities dealing firms
need to attract investors. The state of Florida also has the third-largest number of establishments (6.7%) in
the United States, attracted by the state's large retirement population.
Although the Mid-Atlantic only houses 14.9% of establishments, the region generates over one-third of
total revenue. New York is composed of 6.0% of industry establishments, but the state accounts for more
than one-quarter of total revenue. The region is home to major corporate headquarters, financial
intermediaries and exchanges (i.e. New York Stock Exchange). Prestige and branding also play a big role in
this industry as many prominent industry operators are located near Wall Street.
The Great Lakes region accounts for 16.5% of employer industry establishments. The vast majority of
establishments are located in Illinois, which is home to the CME Group derivatives marketplace. Illinois,
with many firms located in Chicago, represents nearly 30.0% of establishments in the Great Lakes region
and 4.7% in the United States. The West has 15.5% of establishments due to its large population. California
represents 10.1% of total establishments in the United States. Lastly, the Plains and Rocky Mountains
regions account for the lowest amount of industry operators with 9.7% and 4.4% of establishments,
respectively.
Competitive Landscape
Market Share Concentration in this industry is Low
Concentration
The Securities Brokering industry, despite a relatively low level of concentration, is becoming increasingly
concentrated. Information technology improvements continue to provide economies of scale in the
delivery of services. At the same time, brokerage services are becoming just one of a range of financial
services delivered to institutional and retail clients. The convergence of securities brokerages and financial
services within large commercial and investment banks and large asset management firms will increase
industry concentration by creating larger industry players that offer more services than discount brokerage
firms.
Activities include proprietary trading, asset management, financial planning and banking services, all of
which may contribute significantly to a brokerage firm's revenue. The market share of the top four brokers
in this industry has increased to 28.0% in 2019, due to merger and acquisition activity. The growth in retail
brokerage has largely been captured by discount and online brokers that offer lower fees than the top four
brokerage firms. Discount and online brokerages have also had to consolidate to compete with full-service
brokers.
The raft of mergers and acquisitions arising from the subprime mortgage crisis will increase concentration
over the next few years as discount brokerage firms seek to expand their service offerings to compete
with consolidated full-service brokerage firms. Examples of consolidation activities include Bank of
America's acquisition of Merrill Lynch, Wells Fargo's acquisition of Wachovia and Morgan Stanley's joint
venture with, and ultimate acquisition of, Citigroup's Smith Barney.
Key Success Factors IBISWorld identifies 250 Key Success Factors for a business. The most important for this industry are:
 Must comply with government regulations: Broker-dealers are subject to regulations covering all
aspects of the securities business. Broker-dealers are also subject to the Securities and Exchange
Commission's net capital rule, which specifies minimum capital requirements.
 Well-developed internal processes: Efficient and cost-effective clearing and settlement systems are
important to ensure that each trade is recorded in an accurate and timely manner.
 Market research and understanding: Market players must maintain a strong research team to
recommend orders and transactions. Companies usually only earn income when transactions are
made.
 Access to highly skilled workforce: A major player's ability to sustain or improve competitive position
will substantially depend on its ability to attract and retain qualified and licensed employees.
 Provision of a related range of goods/services ("one-stop shop"): Provision of a diverse range of

investment products and services including equities, managed funds, venture capital and IPOs to fill
investor demand for more diversification in their portfolios.
 Ability to quickly adopt new technology: Recent trends of industry consolidation and globalization
present technological and infrastructure challenges that require effective resource allocation to remain
competitive.
Cost Structure
Benchmarks
Profit
Industry profit, measured as earnings before interest and taxes, is estimated to total 12.8% for the average
industry operator in 2019, a decline from 13.9% in 2014. Increasing internal and external competition and
evolving consumer preferences have been the leading causes of the industry's lackluster performance.
Commission rates have continued their gradual downward trend as new entrants have undercut
established industry operators. In particular, new entrant Robinhood Markets Inc. has severely undercut
established online discount brokerages by offering commission-free equity and options trading through its
mobile and desktop applications. In response, several online discount brokerages have dropped their
commissions for online equity trades to $4.95 per trade, further tightening profit margins. However,
industry operators have combated this race-to-the-bottom in commission fees by further bolstering their
investment management and advisory services. For example, Bank of America's brokerage operations
(Global Wealth and Investment Management segment) have exhibited significant growth in operating
income over the past three years largely as a result of the bank's flourishing wealth management business.
Wages
Wages command a significant share of industry revenue given the service-based nature of industry
operations as well as the general necessity for highly educated employees. Given the high level of fiduciary
duty levied upon asset managers, securities brokerages are incentivized to retain top talent. In turn,
investment advisers and managers are compensated well, resulting in relatively high average wage per
employee. Overall, industry wages are expected to account for 38.3% of industry revenue in 2019, up
slightly from 35.9% in 2014.
Purchases
Major purchases for the average industry operator include professional and technical services;
communication services; software; and data processing services and other purchased computer services.
IBISWorld estimates purchases to increase from 6.5% of industry revenue in 2014 to 9.7% of industry
revenue in 2019. Purchasing costs have increased among industry operators largely as a result of
increased demand for professional and technical services and data processing and computer services.
Over the five years to 2019, industry operators have increasingly invested in technology and systems as
brokerage services have become more advanced and online-based. For example, industry operator
Interactive Brokers has been at the forefront of improving securities brokering technology and systems.
For example, Interactive Brokers offers one of the most sophisticated trade execution services in the
industry with its SmartRouting system that automatically routes orders through multiple exchanges while
guaranteeing the best price execution. As both retail and professional investors continue to demand online
brokerage services, IBISWorld expects purchases related to technology and systems to increase over the
five years to 2024.
Marketing
Marketing costs are forecast to account for 0.7% of revenue in 2019.
Depreciation
Depreciation costs are estimated to account for 0.7% of revenue in 2019.
Rent
Rent costs are estimated to account for 1.3% of industry revenue in 2019.
Utilities
Utilities costs are estimated to account for 0.1% of industry revenue in 2019.
Other Costs
Other costs are estimated to account for 36.4% of industry revenue in 2019.
Basis of Competition Competition in this industry is High and the trend is Increasing
Internal competition
Industry operators within the Securities Brokering industry primarily compete on a basis of commissions
charged per trade. Secondary competitive factors include the brokerage's reputation and value-added
services such as broker-assisted trades and advisory services. Furthermore, competition among
brokerages is separated between full-service brokers (i.e. Bank of America Merrill Lynch) serving
professional money-managers and online discount brokerages serving retail investors (E-trade).
Competition among full-services brokerages is low and steady considering the niche market of
professional investors who either do not qualify or choose not to use prime brokerage services, a service
catered to large institutional investors covered by the investment banking industry (IBISWorld report
52311). However, over the past five years, full-service brokerages have increasingly incorporated value-
added services such as client advisory services and asset management services (such as portfolio
rebalancing).
In contrast, the competitive landscape of brokerages serving retail investors is largely dependent on
commissions charged per trade and thereby inelastic demand. Given the standardized nature of the
industry's core service (buying or selling securities on the open market), industry operators such as TD
Ameritrade, E-trade and Fidelity compete on the basis of value-added services and products. In particular,
retail brokerages strive for differentiation; one of the most common ways for retail brokerages to compete
is by offering advanced desktop trading platforms (software) in which investors can track and analyze
markets.
As of 2013, Palo Alto company Robinhood Markets Inc. has been a major source of disruption for the
Securities Brokering industry being the first online brokerage to offer commission-free trades. Primarily
aimed at the millennial market, Robinhood serves as a simplified brokerage service offering very little
value-added services and a mobile app as its only trading platform. Despite retail brokerages efforts to
differentiate, trading commissions represent the largest factor of consumer demand. In turn, Robinhood
has grown over the past five years and has been a major source of competition for other retail brokerages.
External competition
Aside from competition from firms traditionally engaged in securities brokerage, the industry contends
with competition from other sources, primarily the prime brokerage division of investment banks. Large
institutional investors such as hedge funds, pension funds and endowment funds require more advanced
brokerage services given the size of trades and their potential effect on market activity. Moreover, prime
brokerages provide value-added services such as risk management and cash financing to institutional
clients. Although prime brokerage represents a source of external competition for the Securities Brokering
industry, overall, the two services differentiate significantly in regard to the markets they serve. As a result,
external competition for the Securities Brokering industry is low and steady.
Barriers to Entry Barriers to Entry in this industry are Medium and the trend is Steady
Entities that wish to start up as securities brokerages experience

significant marketing costs to gain market acceptance.
Furthermore, start-ups will require upfront funds to establish effective distribution channels. Although
technology has lowered the cost of trading platforms and products and services distribution networks,
enabling independent advisers to enter the industry, significant investment in the technology required to
develop and run an internet-based platform for clients is still considerable. Further investments in
computer-based settlement systems are also required to maintain and grow market share. Newly formed
entities in the industry contend with additional challenges in attracting and retaining qualified and
experienced staff. The ability to provide good investment recommendations and research reports is
determined by the degree of staff quality.
New entrants to this industry are most likely to be subsidiaries of existing financial institutions or
associated with current players. Firms with an existing client base and distribution network whose size is
large enough to garner economies of scale are the most likely new entrants to succeed in the industry.
Discount and online brokers entered the industry in the 1980s and late 1990s, respectively. Online brokers
are very competitive in pricing, and larger online brokers have the advantage of lower expenses due to the
economies of scale provided by trading platforms that have scalability. Consolidation is occurring among
full-scale brokerage firms, increasing the difficulty for new entrants and smaller existing firms to compete.
However, technology and an existing client base will still enable independent advisers to enter the industry
and form partnerships with existing brokerage firms to survive in the industry and gain market share.
Providing additional barriers to entry are the capital and regulation requirements set by the Securities and
Exchange Commission (SEC) as well as regulatory requirements and industry best-practices set by the
Financial Industry Regulatory Authority (FINRA). The SEC and state securities commissions require that
broker-dealers and their representatives are registered federally and in the states in which participants
conduct their business. Increased legislation on independent advisers, capital requirements and investor
protection could act as an additional barrier to entry over the coming years.
Barriers to Entry Checklist
Competition High
Concentration Low
Life Cycle Stage Mature
Technology Change High
Regulation & Policy Heavy
Industry Assistance None
Industry Globalization Globalization in this industry is Low and the trend is Steady
The level of foreign ownership in the Securities Brokering industry is moderate. Large US investment banks
own the majority of US full-service securities brokerages. The largest online brokers are also US firms.
However, there are several brokerages owned by foreign companies such as Nomura Securities, Deutsche
Bank and ING.
The Securities and Exchange Commission (SEC) requires that all broker-dealers physically operating within
the United States must register with the SEC, even if their activities are directed only toward foreign
investors outside of the United States. The SEC also requires that foreign broker-dealers operating from
outside the United States be registered with the SEC if they are undertaking transactions on behalf of any
person in the United States. This includes the use of the internet to offer or advertise securities
transactions.
Major Companies
Major Players
Bank of America Corporation
Market Share: 8.4%

Brand Names: Merrill Lynch Global Wealth Management, Merrill Edge, Global Wealth and Investment
Management, Consumer Banking
Headquartered in Charlotte, NC, the Bank of America Corporation (Bank of America) is one of the world's
largest financial institutions, serving individuals, small and medium-sized businesses, institutional
investors, large corporations and governments. Bank of America offers a range of banking, investing,
asset management and other financial and risk management products and services carried out globally
by more than 204,000 employees. The company separates its businesses into four main segments:
Consumer Banking, Global Wealth and Investment Management (GWIM), Global Banking and Global
Markets. The company reported overall revenue of $91.2 billion in 2018 (latest data available).
Bank of America Corporation operates in the Securities Brokering industry through two of its operating
segments: Consumer Banking and GWIM. The bank offers self-directed and advisory brokerage services
to individuals with under $250,000 in investable assets through its Merrill Edge subsidiary. Bank of
America also offers a full-service brokerage experience under its Merrill Lynch Global Wealth
Management and US Trust subsidiaries, which primarily serves clients with at least $250,000 in
investable assets. Bank of America's wealth management operations combine brokerage and
investment advisory and management services (full-service brokerage) and are, therefore, also relevant
to the Financial Planning and Advice industry (IBISWorld report 52393).
Over the five years to 2019, Bank of America's influence in the Securities Brokering industry has grown.
With more than $2.0 trillion in client balances, Bank of America's GWIM segment has become the largest
wealth management operation in the world. The bank's GWIM segment generated $19.3 billion in
revenue in 2018. In regard to the bank's Consumer Banking segment (which operates its brokerage
services through its Merrill Edge subsidiary), total client brokerage assets increased 5.0% to $185.9
billion year-over-year, according to Bank of America's 2018 annual report (latest available data).
Financial performance
Over the five years to 2019, Bank of America's industry-specific revenue is expected to increase at an
annualized rate of 1.7% to $13.2 billion. Due to steadily increasing capital markets, assets under
management for GWIM and client brokerage assets for Consumer Banking have both increased at
relatively consist rates with the exception of 2015. In 2015, client assets under management declined as
a result of stock market declines during the year. Despite a rough patch in 2015, the financial
performance of Bank of America's securities brokerage operations has been characterized by robust
growth. Consistently rising capital markets during the latter half of the five-year period have resulted in
increasing assets under management and client brokerage assets. As a result, Bank of America's
industry-specific operating income has exhibited strong growth since 2015, increasing as much as
13.2% in 2018 alone as higher asset balances have commanded higher account servicing fees. Overall,
IBISWorld forecasts Bank of America's brokerage operations to generate $2.6 billion in operating
income in 2019.
Wells Fargo & Company
Market Share: 7.2%

Brand Names: Wells Fargo Clearing Services, LLC, Wells Fargo Advisors, Wells Fargo Advisors Financial
Network, LLC
Founded in 1852, Wells Fargo and Company (Wells Fargo) is a diversified financial services company.
Headquartered in San Francisco, the company provides retail, commercial and corporate banking
services. Through various subsidiaries, Wells Fargo is also involved in wholesale banking, mortgage
banking, consumer finance, equipment leasing, agricultural finance, commercial finance, securities
brokerage and investment banking, insurance and brokerage services, computer and data processing
services, trust services, investment advisory services, mortgage-backed securities servicing and venture
capital investment. The company's overall revenue was $86.4 billion in 2018 (latest data available).
The company separates its business into three operating segments: community banking; wholesale
banking; and wealth and investment management. The company receives commissions and other fees
from full-service and discount brokerage customers. Revenue from these operations includes
commissions based on the number of transactions executed at customers' requests and asset-based
fees, which are based on the market value of a customer's assets.
Wells Fargo operates within the Securities Brokerage industry through two of its wholly owned
subsidiaries: Wells Fargo Clearing Services LLC and Wells Fargo Advisors Financial Network LLC. Wells
Fargo offers its in-bank brokerage services through Wells Fargo Clearing Services LLC under the trade
name Wells Fargo Advisors. Furthermore, Wells Fargo conducts clearing services for affiliated retail
brokerages and unaffiliated clients under the First Clearing trade name. In addition to Wells Fargo's in-
bank brokerage services, the company supports a network of more than 630 independent brokers
(individual brokerage practices) through its Wells Fargo Advisors Financial Network LLC subsidiary.
Over the five years to 2019, Wells Fargo's revenue from brokerage advisory, commissions and other fees
is forecast to decline an annualized 1.1% to $11.3 billion. Wells Fargo's financial performance during the
former half of the five-year period has largely been characterized by double-digit growth in earnings
before income and taxes (EBIT) as the bank has successfully grown assets under management under
both positive and less-than-deal operating conditions. For example, Wells Fargo was able to grow the
EBIT of its wealth management operations 10.6% in 2015, a tumultuous year for the industry as equities
markets exhibited abnormal levels of volatility. However, the latter half of the five-year period has been
characterized by several realized scandals occurring in the bank's consumer lending division in 2016
and 2017. In 2018, federal regulators imposed fines totaling more than $2.0 billion and the Federal
Reserve has prohibited the bank from growing assets until certain governance measures are met. In
turn, IBISWorld expects Wells Fargo's financial performance to suffer over the coming years. In turn,
industry-specific operating income is expected to decline in 2019 to $2.2 billion.
The Charles Schwab Corporation
Market Share: 7.1%

Brand Names: Investor Services, Adviser Services
Headquartered in San Francisco, the Charles Schwab Corporation (CSC) is a financial services firm
engaged in securities brokerage, banking, asset management and financial advisory services through its
subsidiaries. One of these subsidiaries, Charles Schwab and Company Inc. (Schwab), is a securities
broker-dealer with more than 355 domestic branch offices in 4 states, Puerto Rico and London and
serves clients in Hong Kong through one of CSC's subsidiaries. At fiscal year-end 2018, Schwab had
$3.3 trillion in client assets, 11.6 million active brokerage accounts, 1.7 million corporate retirement plan
participants and 1.3 million banking accounts, making it among the largest discount brokerage firms in
the United States. CSC's overall revenue was $10.1 billion in 2018 (latest data available).
CSC provides financial services to individuals and institutional clients through two segments: investor
services and adviser services. The investor services segment provides retail brokerage and banking
operations for individual investors, retirement plan services and corporate brokerage services. The
adviser services segment provides custodial, trading and support services to independent registered
investment advisers as well as retirement plans, equity compensation plans and other financial services
to corporations and their employees.
Over the five years to 2019, CSC's industry-specific revenue is estimated to increase an annualized
13.1% to $11.2 billion, including expected growth of 10.6% in 2019 alone. CSC's financial performance
during the five-year period has been characterized by consistent growth in its core businesses: investor
services and adviser services. In line with capital market appreciation during the five-year period, CSC's
total client assets have grown an annualized 11.0% between 2015 and 2019 with growth in adviser
services client assets outpacing that of investor services assets. Moreover, CSC has consistently added
new active brokerage accounts over each of the past four years and is expected to add more in 2019. As
the company has grown both its retail brokerage business and investment services business, the
company has benefited from greater economies of scale. Greater client asset balances enable the
company to further distribute its fixed costs, thereby improving efficiency. To this end, CSC has
consistently grown its profit margins over each of the past four years. IBISWorld expects this trend to
continue in 2019 with CSC forecast to generate $3.9 billion in income before interest and taxes.
Morgan Stanley
Market Share: 5.3%

Brand Names: Morgan Stanley Wealth Management, Morgan Stanley & Co. LLC, MSSB LLC
Headquartered in New York, Morgan Stanley is a global financial services company. It operates through
three segments: institutional securities, wealth management and investment management. In its
institutional securities segment, Morgan Stanley provides capital raising, financial advisory and
corporate lending services, and conducts sales and trading activities. Its wealth management segment,
previously titled global wealth management group, includes the company's Morgan Stanley and Co. LLC
subsidiary. Its investment management segment is one of the largest global investment organizations,
offering clients a diverse range of equities, fixed income, alternative investments and merchant banking
strategies. Morgan Stanley's overall revenue was $36.3 billion in 2018.
In 2009, Morgan Stanley formed a joint venture with Citigroup. This new business, originally called
Morgan Stanley Smith Barney, combined Morgan Stanley's wealth management operations with
Citigroup's retail brokerage operation, Smith Barney. In September 2012, Morgan Stanley increased its
interest in the venture from 51.0% to 65.0%, while Citigroup's interest decreased to 35.0%. In June 2013,
Morgan Stanley received regulatory approval to acquire the remaining 35.0% stake and rebranded the
business as Morgan Stanley Wealth Management, hence the substantial increase in operating income in
2014. The brokerage segment is one of the largest wealth management operations in the United States.
Morgan Stanley Wealth Management provides brokerage and investment advisory services to individual
and institutional investors through more than 15,712 representatives in 600 locations. It offers various
types of investments, including equities, options, futures, foreign currencies, precious metals, fixed
income securities, mutual funds, structured products, alternative investments, unit investment trusts,
managed futures, separately managed accounts and mutual fund asset allocation programs. Brokerage
revenue is garnered from fees based on transactions and assets under management.
Over the five years to 2019, Morgan Stanley's industry-specific revenue is expected to increase an
annualized 0.9% to $8.3 billion, despite a slight decline of 2.8% in 2019 alone. Since its rebranding in
2014, Morgan Stanley Wealth Management has experienced an abnormal degree of volatility in regard to
its financial performance. Along with other wealth management operations, Morgan Stanley's revenue
growth slowed dramatically in 2015 as a result of stock market volatility causing clients to pullback on
securities investing activities. Nevertheless, with the exception of 2015, Morgan Stanley's financial
performance during the five-year period has been characterized by growing revenue and operating
income as the company has strategically grown its assets under management while gradually curbing
its noncompensation expenses. The company is forecast to generate industry-specific operating
income of $2.0 billion in 2019.
Other Companies JPMorgan Chase & Co.
Market Share: 1.5%

Brand Names: JP Morgan Asset Management
Headquartered in New York, JPMorgan Chase and Co. (JPMorgan Chase) is one of the largest banking
institutions in the United States with roots going back to 1895. The company was formed through the
combination of several large US banks during the past decade, including Chase Manhattan Bank, JP
Morgan and Company, Bank One, Bear Stearns and Washington Mutual Inc. (WaMu) and now employs
more than 250,000 individuals globally. JPMorgan Chase participates in investment banking, financial
services for individuals and small businesses, commercial banking, financial transaction processing, asset
management and private equity. The company's overall revenue was $109.0 billion in 2018 (latest data
available).
JPMorgan Chase operates in four business segments: consumer and community banking (CCB);
corporate and investment banking (CIB); commercial banking; and asset and wealth management (AWM).
The company offers brokerage services through its CIB, prime brokerage and AWM, retail brokerage,
segments. The AWM segment is a global leader in investment and wealth management, serving
institutional and retail investors throughout the world. In 2019, IBISWorld expects JPMorgan Chase's
brokerage-specific revenue to total $2.4 billion.
Operating Conditions
Capital Intensity
The level of capital intensity is Low
The Securities Brokering industry is characterized by a low level of capital intensity due to the service-
based nature of industry operations. IBISWorld estimates for every $1.00 spent on wages, industry
operators will allocate $0.02 to capital investment. Given the complexity of certain securities brokerage
and wealth management services, industry operators demand highly educated individuals who tend to be
well-compensated. The minor amount of capital investment engaged in by industry operators is typically
allocated to upgrading technological infrastructure such as computers, servers and internet routers.
Overall, capital intensity among industry operators has remained historically low with the industry's capital
intensity ratio remaining unchanged from 2014 levels.
Technology &
Systems Level Factor Disruption Description
Medium Rate of Potential A ranked measure for the number of

Innovation patents assigned to an industry. A
faster rate of new patent additions to
the industry increases the likelihood
of a disruptive innovation occurring.
Very Innovation Very A measure for the mix of patent

High Concentration Likely classes assigned to the industry. A
greater concentration of patents in
one area increases the likelihood of
technological disruption of
incumbent operators.
Medium Ease of Entry Potential A qualitative measure of barriers to

entry. Fewer barriers to entry
increases the likelihood that new
entrants can disrupt incumbents by
putting new technologies to use.
High Rate of Entry Likely Annualized growth in the number of

enterprises in the industry, ranked
against all other industries. A greater
intensity of companies entering an
industry increases the pool of
potential disruptors.
High Market Likely A ranked measure of the largest core

Concentration market for the industry. Concentrated
core markets present a low-end
market or new market entry point for
disruptive technologies to capture
market share.
Technology & The level of technology change is High

Systems
The industry's use of telecommunications services, information
technology and electronic distribution technologies has increased at a
rapid rate.
Technology in this industry is used to improve the efficiency and effectiveness of delivering information
and services to clients, which reduces processing and labor costs. Technology expenditures will continue
to grow as a share of revenue as industry operators increasingly upgrade their trading platforms in an
effort to differentiate their product offerings.
Discount brokerage firms entered the industry in the 1980s, putting traditional full-service stockbrokers
under increasing price competition, which resulted in a decline in commission fees. Discount and, later,
online brokerages provided clients with real-time share prices, company and industry research reports and
charting facilities, all at lower rates. TD Ameritrade introduced the first quote and order entry system via
touch-tone phone, and the company became the first firm to offer online securities trading in 1994.
The internet led to the rapid growth of online brokerages that offered just trade execution to retail
investors, resulting in an explosion of online trading by "self-directed investors" that primarily valued fast
and convenient trade execution. Unlike traditional brokerages, online brokerage firms typically have branch
offices, and the entire process is automated. While most trading is still concentrated in the primary
exchanges, IT brought about an explosion of alternate trading venues such as electronic communications
networks that match buyers and sellers. These alternate trading venues serve as less expensive
alternatives, particularly for smaller brokerage firms that are not members of the main exchanges.
Algorithmic trading and high frequency trading are the two latest market technological developments that
could affect future revenue and profitability. Large investment banks such as Goldman Sachs and small
proprietary trading firms have leveraged expensive technology to cut trading times down to milliseconds
to enter and exit trade positions rapidly. They hope to exploit small securities price inefficiencies in the
market in a practice known as market making. Current estimates place nonhuman trading on exchanges
between 50.0% and 70.0% of total trade volume.
Concerns over algorithms' ability to affect market volatility came to a head in the May 6, 2010 Flash Crash,
when markets lost significant value and rebounded all in a matter of minutes. The July 2011 report by the
International Organization of Securities Commissions, an international body of securities regulators,
concluded that high-frequency trading clearly contributed to this flash crash event. However, several
studies have concluded that high-frequency trading adds significant liquidity to markets, improves
securities pricing and lowers trading costs. This type of trading can have significant effects on investor
confidence in the future and pose a significant threat to future earnings.
Revenue Volatility The level of volatility is Medium
The Securities Brokering industry exhibits a moderate level of revenue volatility primarily due to the
industry's correlation with capital markets. Over the five-year period, industry revenue declined as much as
1.8% in 2015 and increased as much as 5.0% in 2017. The industry's decline in revenue in 2015 was
primarily caused by volatile domestic stock markets and the overall lackluster annual performance of the
S&P 500 in 2015. As stock market volatility increases, wealth management clients are more likely to pull
their assets from securities brokerage operations, resulting in a decline in assets under management.
Overall, industry revenue volatility has declined since 2015 as capital markets have posted steady gains,
on average, over the five years to 2019.
Regulation & Policy The level of regulation is Heavy and the trend is Steady
The Securities Brokering industry is extensively regulated at the federal and state levels in the United
States. Market participants are required to register as broker-dealers with the Securities and Exchange
Commission (SEC), the Financial Industry Regulatory Authority (FINRA) and with respective state securities
commissions. Many industry operators are members of self-regulatory organizations and listed on various
securities exchanges, such as the New York Stock Exchange and NASDAQ. Depending on the brokerage
services offered and the financial products traded, additional regulatory bodies include the Commodity
Futures Trading Commission, the National Futures Association and the Federal Deposit Insurance
Corporation.
The role of the SEC is to protect investors and maintain the integrity of the securities markets. The SEC
oversees key participants in the securities world, including stock exchanges, broker-dealers, investment
advisers, mutual funds and public utility holding companies. Federal or state securities laws require
brokers, advisers and their firms to be licensed or registered with FINRA. Investment advisers who manage
$25.0 million or more in client assets must register with the SEC. If they manage less than $25.0 million,
they must register with the state securities agency in the state where they have their principal place of
business.
Banks that intend to provide advisory and selling services employing US jurisdictional means must also
register with the SEC as investment advisers or as broker-dealers. They are subject to group-wide
supervision and examination by the SEC and to minimum capital requirements on a consolidated basis.
The regulation and policy enacted in the Securities Brokering industry has garner public confidence in the
nation's capital markets. Greater investor confidence in regard to the integrity of the financial system leads
to investment in securities and increased industry revenue.
Legislation can also have adverse effects on the industry. New higher capital requirements for brokerage
firms that engage in margin lending for trading acts as a barrier to entry for small firms. The extensive
registration, regulation and disclosure requirements on brokers who provide investment advice also act as
a barrier to entry.
Securities Exchange Act of 1934
The Securities Exchange Act of 1934 empowers the SEC with broad authority over all aspects of the
Securities Brokering industry. This authority includes the power to register, regulate and oversee the
nation's securities self-regulatory organizations (SROs). The exchanges, among others, are identified as
SROs and must create rules that enable disciplining members for improper conduct and for establishing
measures to ensure market integrity and investor protection. SRO-proposed rules are published for
comment before final SEC review and approval. FINRA is an SRO under the Securities Exchange Act of
1934, successor to the National Association of Securities Dealers Inc. It is the largest non-governmental
regulator for all securities firms doing business in the United States and oversees 3,712 broker-dealer
firms and 630,132 registered securities representatives.
FINRA maintains and administers the General Securities Representative Exam (Series 7), required to
become a registered representative of a broker-dealer in the United States. Its role is to protect investor
and market integrity through effective and efficient regulation, complementary compliance and
technology-based services.
The Securities Investors Protection Act of 1970
The US Congress passed the Securities Investors Protection Corporation (SIPC) in 1970 through the
Securities Investors Protection Act to protect securities investors from financial harm if a broker deal fails.
The membership corporation serves two primary roles in the event a broker-dealer fails. First, SIPC acts to
distribute customer cash and securities to investors. Second, if the investor's cash or securities are not
available, SIPC offers insurance coverage for up to $500,000 of the customer's net equity balance,
including up to $100,000 in cash.
The Sarbanes-Oxley Act of 2002
The Sarbanes-Oxley Act of 2002 (SOX) was written into law as a result of financial scandals committed by
several companies including Enron, Adelphia, Tyco International and WorldCom. The scandals resulted in
losses of billions for investors as shares of the aforementioned companies tanked. The legislation, named
after sponsors US senator Paul Sarbanes and US representative Michael Oxley, set new or enhanced
standards for all US public company boards, management and public accounting firms. While SOX has
helped increase consumer confidence in US capital markets after a string of corporate accounting fraud,
opponents of SOX argue that it increases the regulation costs for corporations and makes them less
competitive against foreign firms.
2010 Dodd-Frank Wall Street Reform and Consumer Protection Act
In July 2010, President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act,
the most comprehensive group of financial regulatory reforms since the Great Depression. The act defines
several new securities laws, which has implications for broker-dealers with respect to their sales and
practices, trading and investments and advisory services. Among its most directly relevant clauses to the
Securities Brokering industry, it creates a new regulatory body to set requirements concerning the terms
and conditions of consumer financial products and expands the role of state regulators in enforcing
consumer protection requirements over banks.
The Economic Growth, Regulatory Relief and Consumer Protection Act
Signed into law in May 2018, the Economic Growth, Regulatory Relief and Consumer Protection Act (the
Regulatory Relief Act) serves primarily to scale back bank holding company compliance measures
imposed by Dodd-Frank while also improving consumer access to credit. Among the most significant
changes is the increase of the systemically important financial institution (SIFI) threshold from $50.0
billion to $250.0 billion. However, the SIFI threshold will be increased gradually over an 18-month period
with a SIFI threshold of $100.0 billion being effective immediately. Generally, an increase in the SIFI
threshold provides significant regulatory relief for the Savings Banks and Thrifts industry (IBISWorld report
52212) as certain institutions will no longer have to adhere to stringent and costly SIFI regulations.
Ultimately, the Regulatory Relief Act is not expected to directly affect the Securities Brokering industry as
the act primarily pertains to consumer credit protections and bank holding company deregulation.
Industry Assistance The level of industry assistance is None and the trend is Steady
The Securities Brokerage industry does not receive ongoing direct assistance from the government in the
form of tariffs or legislation. However, many of the banking major players that provide securities brokerage
services did receive funds from the Troubled Asset Relief Program (TARP) to help offset the effects of the
2008 financial crisis and subsequent recession. For example, Wells Fargo received $25.0 billion and Bank
of America received $20.0 billion to cover losses on mortgage loan defaults and mortgage-backed
securities. Capital injections under the TARP program were viewed as a cost-effective way to boost capital
levels at a time when the US economy looked especially weak and not as a way to prop up industry
operators. Consequently, the level of industry assistance is not applicable to this industry.
Key Statistics
Industry Data
Domestic
Revenue IVA Establishments Enterprises Employment Exports Imports Wages Demand S&P 500
($m) ($m) (Units) (Units) (Units) ($m) ($m) ($m) ($m) (Index)
2010 137,876 73,654 56,880 26,665 327,814 N/A N/A 54,903 N/A 1,131
2011 139,316 78,570 55,033 26,092 319,798 N/A N/A 55,722 N/A 1,281
2012 138,719 74,919 60,580 27,066 326,118 N/A N/A 50,921 N/A 1,386
2013 143,941 73,403 59,674 25,905 308,139 N/A N/A 50,804 N/A 1,652
2014 152,005 76,881 56,284 26,099 305,198 N/A N/A 54,536 N/A 1,944
2015 149,309 77,495 54,071 25,356 310,843 N/A N/A 55,397 N/A 2,052
2016 148,877 76,833 55,594 25,970 314,526 N/A N/A 54,204 N/A 2,106
2017 156,323 80,077 59,132 27,443 326,547 N/A N/A 58,661 N/A 2,460
2018 155,540 80,741 59,961 27,803 326,473 N/A N/A 59,625 N/A 2,738
2019 157,259 81,562 60,717 28,145 329,681 N/A N/A 60,225 N/A 2,864
2020 155,643 80,833 60,506 28,074 327,547 N/A N/A 59,789 N/A 3,023
2021 155,431 80,787 60,571 28,134 327,930 N/A N/A 59,829 N/A 3,008
2022 155,672 80,987 61,007 28,348 329,390 N/A N/A 60,061 N/A 3,103
2023 155,958 81,240 61,696 28,682 331,051 N/A N/A 60,325 N/A 3,276
2024 156,296 81,502 62,312 28,981 332,634 N/A N/A 60,582 N/A 3,453
Annual Change
Domestic
Revenue IVA Establishments Enterprises Employment Exports Imports Wages Demand
(%) (%) (%) (%) (%) (%) (%) (%) (%) S&P 500 (%)
2010 -2.40 -0.67 -3.99 -1.43 -11.9 N/A N/A 10.8 N/A 19.2
2011 1.04 6.67 -3.25 -2.15 -2.45 N/A N/A 1.49 N/A 13.3
2012 -0.43 -4.65 10.1 3.73 1.97 N/A N/A -8.62 N/A 8.25
2013 3.76 -2.03 -1.50 -4.29 -5.52 N/A N/A -0.23 N/A 19.2
2014 5.60 4.73 -5.69 0.74 -0.96 N/A N/A 7.34 N/A 17.7
2015 -1.78 0.79 -3.94 -2.85 1.84 N/A N/A 1.57 N/A 5.52
2016 -0.29 -0.86 2.81 2.42 1.18 N/A N/A -2.16 N/A 2.62
2017 5.00 4.22 6.36 5.67 3.82 N/A N/A 8.22 N/A 16.8
2018 -0.51 0.82 1.40 1.31 -0.03 N/A N/A 1.64 N/A 11.3
2019 1.10 1.01 1.26 1.23 0.98 N/A N/A 1.00 N/A 4.58
2020 -1.03 -0.90 -0.35 -0.26 -0.65 N/A N/A -0.73 N/A 5.56
2021 -0.14 -0.06 0.10 0.21 0.11 N/A N/A 0.06 N/A -0.51
2022 0.15 0.24 0.71 0.76 0.44 N/A N/A 0.38 N/A 3.15
2023 0.18 0.31 1.12 1.17 0.50 N/A N/A 0.44 N/A 5.58
2024 0.21 0.32 0.99 1.04 0.47 N/A N/A 0.42 N/A 5.40
Key Ratios
Imports/ Exports/ Revenue per Wages/ Employees per
IVA/Revenue Demand Revenue Employee Revenue estab.
(%) (%) (%) ($'000) (%) (units) Average Wage ($)
2010 53.4 N/A N/A 421 39.8 5.76 167,483
2011 56.4 N/A N/A 436 40.0 5.81 174,240
2012 54.0 N/A N/A 425 36.7 5.38 156,142
2013 51.0 N/A N/A 467 35.3 5.16 164,875
2014 50.6 N/A N/A 498 35.9 5.42 178,692
2015 51.9 N/A N/A 480 37.1 5.75 178,215
2016 51.6 N/A N/A 473 36.4 5.66 172,335
2017 51.2 N/A N/A 479 37.5 5.52 179,639
2018 51.9 N/A N/A 476 38.3 5.44 182,633
2019 51.9 N/A N/A 477 38.3 5.43 182,677
2020 51.9 N/A N/A 475 38.4 5.41 182,537
2021 52.0 N/A N/A 474 38.5 5.41 182,444
2022 52.0 N/A N/A 473 38.6 5.40 182,339
2023 52.1 N/A N/A 471 38.7 5.37 182,223
2024 52.1 N/A N/A 470 38.8 5.34 182,128
Industry Financial Ratios

Apr 15 - Apr 16 - Apr 17 - Apr 18 - Small Medium Large
Liquidity Ratios Mar 16 Mar 17 Mar 18 Mar 19 (<$10m) ($10-$50m) (>$50m)
Current Ratio 1.8 1.8 2.0 1.8 1.7 1.6 2.2
Quick Ratio 1.7 1.3 1.6 1.5 1.3 1.4 2.0
Sales / Receivables (Trade Receivables
74.0 847.5 75.2 73.3 N/C 29.4 15.9
Turnover)
Days' Receivables 4.9 0.4 4.9 N/A N/A N/A N/A
Cost of Sales / Inventory (Inventory
N/A N/A N/A N/A N/A N/A N/A
Turnover)
Days' Inventory N/A N/A N/A N/A N/A N/A N/A
Cost of Sales / Payables (Payables
Turnover)
Days' Payables N/A N/A N/A N/A N/A N/A N/A
Sales / Working Capital 10.1 10.4 8.6 8.3 51.7 4.3 8.4
Coverage Ratios Mar 16 Mar 17 Mar 18 Mar 19 (<$10m) ($10-$50m) (>$50m)
Earnings Before Interest & Taxes (EBIT)
7.4 22.8 12.4 11.6 9.8 7.1 N/A
/ Interest
Net Profit + Dep., Depletion, Amort. /
Current Maturities LT Debt
Leverage Ratios Mar 16 Mar 17 Mar 18 Mar 19 (<$10m) ($10-$50m) (>$50m)
Fixed Assets / Net Worth 0.1 0.1 0.1 0.0 0.0 0.1 0.1
Debt / Net Worth 1.0 1.0 1.5 1.7 4.0 1.7 0.9
Tangible Net Worth 33.8 37.3 13.6 -2.8 -48.9 35.4 46.0
Operating Ratios Mar 16 Mar 17 Mar 18 Mar 19 (<$10m) ($10-$50m) (>$50m)
Profit before Taxes / Net Worth, % 19.2 21.4 18.3 23.0 20.7 19.5 36.0
Profit before Taxes / Total Assets, % 11.2 9.5 12.7 14.7 18.9 9.6 16.3
Sales / Net Fixed Assets 75.7 135.1 71.6 115.9 244.7 62.1 92.4
Sales / Total Assets (Asset Turnover) 3.0 1.8 2.4 1.7 1.5 0.9 2.7
Cash Flow & Debt Service Ratios Apr 15 - Apr 16 - Apr 17 - Apr 18 - Small Medium Large
(% of sales) Mar 16 Mar 17 Mar 18 Mar 19 (<$10m) ($10-$50m) (>$50m)
Cash from Trading N/A N/A N/A N/A N/A N/A N/A
Cash after Operations 6.8 8.7 10.8 10.0 17.1 4.5 N/A
Net Cash after Operations 6.8 11.3 11.1 11.1 17.1 5.2 N/A
Cash after Debt Amortization 0.8 1.7 2.4 0.9 -0.4 2.0 N/A
Debt Service P&I Coverage 5.6 7.2 13.9 10.8 2.6 9.9 N/A
Interest Coverage (Operating Cash) 7.5 14.1 9.3 9.5 3.3 20.2 N/A
Assets, % Mar 16 Mar 17 Mar 18 Mar 19 (<$10m) ($10-$50m) (>$50m)
Cash & Equivalents 45.0 37.5 42.3 43.9 39.9 46.0 50.5
Trade Receivables (net) 12.3 10.3 13.2 15.4 12.9 17.6 17.5
Inventory 0.0 0.0 0.0 0.3 0.7 0.0 0.0
All Other Current Assets 7.3 11.2 11.0 6.5 3.8 11.1 4.3
Total Current Assets 64.6 59.0 66.5 66.0 57.4 74.7 72.2
Fixed Assets (net) 9.8 12.0 10.4 9.5 14.9 3.7 6.3
Intangibles (net) 7.4 5.6 10.9 12.3 12.3 12.1 12.9
All Other Non-Current Assets 18.1 23.4 12.3 12.2 15.4 9.6 8.6
Total Assets 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Total Assets ($m) 1,366.9 873.6 1,014.8 1,857,659,000.0 144,848,000.0 796,393,000.0 916,418,000.0
Liabilities, % Mar 16 Mar 17 Mar 18 Mar 19 (<$10m) ($10-$50m) (>$50m)
Notes Payable-Short Term 14.4 4.6 15.1 9.6 17.3 2.9 2.4
Current Maturities L/T/D 1.1 1.4 1.1 1.7 2.5 1.4 0.0
Trade Payables 9.2 9.7 9.0 12.3 10.7 17.1 6.5
Income Taxes Payable 0.3 0.4 0.4 0.3 0.4 0.2 0.2
All Other Current Liabilities 19.3 18.0 19.4 32.5 46.4 17.9 24.0
Total Current Liabilities 44.3 34.1 45.0 56.3 77.2 39.5 33.2
Long Term Debt 7.2 7.4 23.7 30.4 55.3 8.4 6.9
Deferred Taxes 0.0 0.0 0.1 0.0 0.0 0.0 0.3
All Other Non-Current Liabilities 7.3 15.5 6.7 3.7 4.2 4.6 0.7
Net Worth 41.2 42.9 24.5 9.5 -36.6 47.5 58.9
Total Liabilities & Net Worth ($m) 1,366.9 873.6 1,014.8 1,857,659,000.0 144,848,000.0 796,393,000.0 916,418,000.0
Maximum No. of Statements Used 70.0 47.0 55.0 59.0 28.0 21.0 10.0
Source: RMA Annual Statement Studies, rmahq.org.

RMA data for all industries is derived directly from more than 260,000 statements of member financial institution's borrowers and
prospects
Additional Resources Securities Industry and Financial Markets Association

http://www.sifma.org
US Federal Reserve
http://www.federalreserve.gov
Financial Industry Regulatory Authority

http://www.finra.org
Industry Jargon ALTERNATIVE TRADING SYSTEMS (ATS)

Non-exchange trading venues that are approved by the Securities and Exchange Commission and enable
alternative means of accessing liquidity.
DEFINED BENEFIT PLAN

Pension plan under which an employee receives a set monthly amount upon retirement, guaranteed for
their life or the joint lives of the member and their spouse.
DEFINED CONTRIBUTION PLAN

Retirement savings program under which an employer promises certain contributions to a participant's
account during employment, but with no guaranteed retirement benefit.
ELECTRONIC COMMUNICATION NETWORKS

An electronic system that automatically and directly matches buy and sell orders at specified prices.
REGISTERED INDEPENDENT ADVISERS

This registration means a person is regulated by the SEC. In general, an RIA with more than $25 million
under management must register with the SEC.
Glossary BARRIERS TO ENTRY

High barriers to entry mean that new companies struggle to enter an industry, while low barriers mean it is
easy for new companies to enter an industry.
CAPITAL INTENSITY
Compares the amount of money spent on capital (plant, machinery and equipment) with that spent on
labor. IBISWorld uses the ratio of depreciation to wages as a proxy for capital intensity. High capital
intensity is more than $0.333 of capital to $1 of labor; medium is $0.125 to $0.333 of capital to $1 of labor;
low is less than $0.125 of capital for every $1 of labor.
CONSTANT PRICES
The dollar figures in the Key Statistics table, including forecasts, are adjusted for inflation using the current
year (i.e. year published) as the base year. This removes the impact of changes in the purchasing power of
the dollar, leaving only the "real" growth or decline in industry metrics. The inflation adjustments in
IBISWorld’s reports are made using the US Bureau of Economic Analysis’ implicit GDP price deflator.
DOMESTIC DEMAND
Spending on industry goods and services within the United States, regardless of their country of origin. It is
derived by adding imports to industry revenue, and then subtracting exports.
EMPLOYMENT
The number of permanent, part-time, temporary and seasonal employees, working proprietors, partners,
managers and executives within the industry.
ENTERPRISE
A division that is separately managed and keeps management accounts. Each enterprise consists of one
or more establishments that are under common ownership or control.
ESTABLISHMENT
The smallest type of accounting unit within an enterprise, an establishment is a single physical location
where business is conducted or where services or industrial operations are performed. Multiple
establishments under common control make up an enterprise.
EXPORTS
Total value of industry goods and services sold by US companies to customers abroad.
IMPORTS
Total value of industry goods and services brought in from foreign countries to be sold in the United
States.
INDUSTRY CONCENTRATION
An indicator of the dominance of the top four players in an industry. Concentration is considered high if the
top players account for more than 70% of industry revenue. Medium is 40% to 70% of industry revenue.
Low is less than 40%.
INDUSTRY REVENUE
The total sales of industry goods and services (exclusive of excise and sales tax); subsidies on production;
all other operating income from outside the firm (such as commission income, repair and service income,
and rent, leasing and hiring income); and capital work done by rental or lease. Receipts from interest
royalties, dividends and the sale of fixed tangible assets are excluded.
INDUSTRY VALUE ADDED (IVA)

The market value of goods and services produced by the industry minus the cost of goods and services
used in production. IVA is also described as the industry's contribution to GDP, or profit plus wages and
depreciation.
INTERNATIONAL TRADE
The level of international trade is determined by ratios of exports to revenue and imports to domestic
demand. For exports/revenue: low is less than 5%, medium is 5% to 20%, and high is more than 20%.
Imports/domestic demand: low is less than 5%, medium is 5% to 35%, and high is more than 35%.
LIFE CYCLE
All industries go through periods of growth, maturity and decline. IBISWorld determines an industry's life
cycle by considering its growth rate (measured by IVA) compared with GDP; the growth rate of the number
of establishments; the amount of change the industry's products are undergoing; the rate of technological
change; and the level of customer acceptance of industry products and services.
NONEMPLOYING ESTABLISHMENT
Businesses with no paid employment or payroll, also known as nonemployers. These are mostly set up by
self-employed individuals.
PROFIT
IBISWorld uses earnings before interest and tax (EBIT) as an indicator of a company’s profitability. It is
calculated as revenue minus expenses, excluding interest and tax.
REGIONS
West | CA, NV, OR, WA, HI, AK Great Lakes | OH, IN, IL, WI, MI Mid-Atlantic | NY, NJ, PA, DE,
MD New England | ME, NH, VT, MA, CT, RI Plains | MN, IA, MO, KS, NE, SD, ND Rocky
Mountains | CO, UT, WY, ID, MT Southeast | VA, WV, KY, TN, AR, LA, MS, AL, GA, FL, SC,
NC Southwest | OK, TX, NM, AZ
VOLATILITY
The level of volatility is determined by averaging the absolute change in revenue in each of the past five
years. Volatility levels: very high is more than ±20%; high volatility is ±10% to ±20%; moderate volatility is
±3% to ±10%; and low volatility is less than ±3%.
WAGES
The gross total wages and salaries of all employees in the industry. The cost of benefits is also included in
this figure.
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Securities Brokering in The US Industry Report

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INDUSTRY REPORT 52312

Securities Brokering in the US

Bad investment: Investor uncertainty is expected to cause industry revenue

Nick Masters | October 2019

WWW.IBISWORLD.COM 1-800-330-3772 INFO@IBISWORLD.COM

AT A GLANCE...................................................5 MAJOR COMPANIES......................................27

About This Industry

Supply Chain Supply Industries Demand Industries

Telecommunication Networking Equipment - Portfolio Management

Internet Service Providers - Consumers

Wired Telecommunications Carriers

Stock & Commodity Exchanges

Major Players Bank of America

Main Activities The primary activities of this industry are:

Securities (e.g. stocks, bonds, currencies, derivatives and options) brokerage

Mutual fund sales

The major products and services in this industry are:

Brokering and dealing - debt instruments

Brokering and dealing - equities

Brokering and dealing - derivative contracts

Brokering and dealing - mutual funds

Trust services - fiduciary fees

Financial planning and investment management services

Other products supporting financial services - fees

Similar Industries 52311 - Investment Banking & Securities Dealing in the US

52391 - Venture Capital & Principal Trading in the US

52393 - Financial Planning & Advice in the US

52315 - Commodity Dealing and Brokerage in the US

Related International J5521-GL - Global Investment Banking & Brokerage

K6411a - Investment Banking and Securities Brokerage in Australia

6920 - Securities Brokerage and Transaction Services in China

K66.120 - Security & Commodity Contracts Brokerage in the UK

K6411NZ - Financial Asset Broking Services in New Zealand

$157.3bn 0.7% -0.1%

12.8% 38.3% 1.5%

Increased oversight will improve investors' confidence in full-service brokerages

Brokers have increasingly moved to a fee-based structure

Online brokerage firms are expanding into banking products

Strengths Weaknesses Opportunities Threats

High Customer Class Low Performance Drivers

Executive The Securities Brokering industry primarily serves as an intermediary

Industry Structure Level Trend Level Trend

Life Cycle Mature Regulation Level Heavy Steady

Revenue Volatility Medium Technology Change High

Capital Intensity Low Barriers to Entry Medium Steady

Industry Assistance None Steady Industry Globalization Low Steady

Concentration Level Low Competition Level High Increasing

Key Industry Data

Products & Services

o Demand from open-end investment funds

o Personal savings rate

o Regulation for the Investment Management industries

o Yield on 10-year Treasury note

Root causes of the industry's shift to asset-based fees

Eliminating the middle man

Evolving broker activities and greater integration with wealth management

Embracing a new structure

Products & Services Segmentation

Products & Services

Commissions and transaction fees

Financial planning and investment management services

Demand Determinants Demand for securities brokering services is primarily determined by

Professional investors (noninstitutional)

Regulation & Policy Heavy