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Mark Daly: Why brokerage and investment-planning sectors are unsettled

Mark Daly: Investing
Mark Daly: Investing

The way investors access financial advice and information has changed a lot over the past 20 years. Internet access and mobile devices explain some of the shift, but changing industry trends and population demographics are also a factor.

In early 2015, the Idaho Department of Finance announced record financial services business filings. Director Gavin Gee proclaimed “continued expansion and robust health of the financial services industry in Idaho.” The department issued 168,000 business filings, professional licenses and registrations in 2014, a record high representing 5 percent growth over the previous year. This number included the banking, credit union, mortgage, consumer lending and securities industries. The growth was mainly in banking and insurance, though there appears to be no shortage of investment and banking products, or representatives to offer them.

Contrast that with Investment News, which reported in November that respected names in regional brokerage like Advest, A.G. Edwards and McDonald & Co. are gone. My former firm, Piper Jaffray, sold its brokers to UBS in 2006 but kept research and investment banking. Dozens of regional firms and banks have suffered the same fate.

According to a 2011 survey by Cerulli Associates, the number of brokers has declined steadily from 339,000 in 2005 to 320,000 in 2010, with a projected 312,000 by 2015. Aging retired advisers and the 2008 financial crisis may have contributed to the decline. According to Investment News, 4,020 broker-dealer members exist today, a 12.2 percent decline from 2010.

Millennials’ interest in brokerage-advice businesses has declined. Millennials also avoid investment planning as a career opportunity, according to Investment News, with fewer majors declared in finance and accounting. What’s more, two-thirds of finance graduates with bachelor’s or master’s degrees decline advanced credentials like CFP [certified financial planner] and CPA [certified public accountant], despite attractive starting salaries and less competition for jobs. Asset managers average about $123,000 in starting annual pay. Sales people, advisers and brokers average about $100,000.

The industry has responded with better online access, mobile and tablet tools, research and online trading. Marketing by discount brokers that encourage trading abound. Stay tuned for more shifts in this unsettled landscape.

Mark Daly is managing director, investment officer, Daly & Vachek Investment Consulting Group of Wells Fargo Advisors. dvicg.com; 333-1433. This column appears in the Jan. 20-Feb. 16, 2016, edition of the Idaho Statesman’s Business Insider magazine.

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