Brokers

Dual broker-advisors exceed sole broker registrants for first time, per Finra report

The number of financial professionals dually registered as brokers and investment advisors has steadily increased for over a decade, according to the latest Financial Industry Regulatory Authority (Finra) industry snapshot report. The report shows that the number of dual registrants as of the end of 2021 exceeded the number of solely registered broker-dealer representatives for the first time in a 10-year period dating back to 2012.

Although the report released on May 2 showed data from the past decade, the organization has tracked registration data for the brokers it regulates since its founding in 2007, a Finra spokesperson confirmed.

As the business models of RIAs and brokers continue to evolve, RIA advocates in recent years have criticized federal rules like Regulation Best Interest for decreasing their ability to differentiate their standards of service from those of brokers. More broadly, longer-developing trends like increased access to securities have increasingly forced brokers to adapt their own service offerings, said Brian Hamburger, an attorney and CEO of MarketCounsel, an RIA compliance consultant.

‘We have technology, tools and platforms out there that have democraticized access to the market,’ said Hamburger. ‘The challenge that consumers face now isn’t access to the market; the challenge they face is how to build a well-diversified portfolio, how to manage risk, how to ensure that their needs, goals and objectives are aligned with their portfolio.’

As of the end of 2021, Finra counted 307,590 dually registered broker-investment advisors, compared to 304,867 individuals solely registered as broker-dealer representatives. In addition, the organization reported 77,468 investment advisor representatives registered with the Securities and Exchange Commission (SEC) or state governments. 

Graph showing Securities Industry Registered Individuals by Type of Registration from 2012 to 2021

Per Finra data, the number of sole brokers has steadily declined, while dual registrants and sole investment advisors, respectively, have increased each year since 2008. Finra’s first industry snapshot report in 2018 showed the gap between the number of sole brokers and dual registrants gradually closing throughout the preceding decade. In 2008, there were less than 250,000 dual registrants, compared to well over 400,000 sole brokers. 

Amid the steadily rising numbers, enforcement of dual registrants remains a priority for the SEC this year. Examination priorities the SEC has outlined will focus on potential conflicts of interest, including the recommendation of high-fee or proprietary products and compensation structures that can influence recommendations. 

For clients, dual registration can create confusion in their relationship to financial advice providers, said Hamburger. But over the long term, Hamburger said he sees the brokerage model evolving into the RIA business model, which could mitigate the conflicts of interest inherent to the former. Brokers traditionally charge a sales-based commission for financial products. 

‘This makes the RIA model even stronger, and I think that over time what you’ll find is you’ll find an eventual separation between securities brokerage and investment advice,’ Hamburger said. ‘Most people who call themselves financial advisors are going to side with the client.’

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