Broker/Dealers Facing Potential Talent Shortage

February 15, 2011 ( – The number of investment professionals at broker/dealers has remained largely unchanged at approximately 310,000 over the last few years, and investment professionals are aging with no clear source of retiree replacements, a new study concluded.

A news release about the study by Pershing LLC, a BNY Mellon company, said the percentage of investment professionals over 55 years of age increased from 32% in 2007 to 36% in 2009.  At independent broker-dealers, investment professionals with less than $50,000 in production dropped from 55% of affiliated investment professionals in 2005 to 42% in 2009.

Meanwhile, investment professionals’ willingness to switch firms creates opportunities and challenges.  According to the study, 2% of brokerage-affiliated investment professionals with $50,000 or more in Gross Dealer Concession (GDC) would target a wirehouse when changing firms.  Nearly half (47%) preferred an independent broker-dealer, and 22% would seek to join or start an RIA.

While 64% of investment professionals report that they are “very unlikely” to leave their current firm, 12% say they are at least somewhat likely to move to a different firm within the next three years. This translates into 11,600 broker/dealer affiliated investment professionals seeking to join a new firm each year.  

In rank order, independence, firm brand, and services and support are the top reasons that drive an investment professional to join a particular broker/dealer.  The top three reasons investment professionals decide to stay with a broker/dealer, in order of importance, include services and support, culture and independence.  

“With many investment professionals moving toward retirement or more independent business models, a broker-dealer’s growth will increasingly be tied to its ability to successfully attract, develop and retain top talent,” said Jim Roth, managing director of Pershing, in the news release.  “In working with our independent broker-dealer customers, we emphasize the importance of creating compelling differentiators that attract and retain investment professionals, which will help provide firms with a clear competitive advantage in the years ahead.”

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