Securities Brokers Industry Profile

The securities brokerage industry in the US includes about 7,500 companies with combined annual revenue of about $100 billion. Major companies include Charles Schwab, Edward Jones, and brokerage units of large financial services companies such as Morgan Stanley, Goldman Sachs, and Citigroup. The industry is highly concentrated: the top 50 companies account for more than 80 percent of revenue.

COMPETITIVE LANDSCAPE

Demand is driven by the returns of securities markets relative to alternative investments. The profitability of individual companies depends on efficient operations and good marketing. Large companies have economies of scale in operations and high name recognition. Small companies can compete effectively by offering better customer service. The industry is capital-intensive; average annual revenue per employee is nearly $400,000.

The traditional brokerage industry that sold stocks to individual investors has largely evolved into companies that either broker large stock trades for institutional investors or sell a variety of investment products to individuals. Instead of buying individual securities, many individuals now invest in mutual funds.

PRODUCTS, OPERATIONS & TECHNOLOGY

Major services are stock brokerage, investment advice, brokerage of bonds and derivatives, and the brokerage of mutual funds. Stock brokerage accounts for about 40 percent of industry revenue, investment advice for about 15 percent, and brokerage of debt securities for about 10 percent. The remaining revenue is comprised of income from brokerage of investment securities, derivatives, and other fees.

Brokerage includes helping individuals and institutions buy and sell securities, without taking ...