The Pulse

U.S. Broker/Dealer Marketplace 2023: The Challenging Pursuit Of Organic Growth

10-largest broker/dealers control 58% of retail assets

Fueled by a decade of M&A, the largest B/Ds are driving advances in scale, efficiency, and assets under management, according to a new report from Cerulli Associates. Access the full report here.

October 13, 2023, BOSTON—The 10-largest broker/dealer (B/D) firms by assets under management (AUM) have 123,000 financial advisors and account for 58% of the total retail financial advisor industry. Fueled by a steady stream of mergers and acquisitions over the last decade, this top-heavy skew in the marketshare of AUM toward the largest firms underscores the need for scale to remain competitive in the marketplace, according to Cerulli’s latest Report, U.S. Broker/Dealer Marketplace 2023: The Challenging Pursuit of Organic Growth.

According to the research, over the last decade, one-fifth of the top-25 B/D firms by AUM as of 2012 have either been acquired or merged, reflecting the consolidation that has been characteristic of the B/D marketplace as firms are pressured to increase scale to remain competitive and maximize profit margins. Very large B/Ds have leveraged their scale and their capital positions to outgrow their smaller counterparts with a five-year AUM compound annual growth rate of 8.4%, compared to large and medium-sized B/Ds with annualized growth rates of 6.6% and 6.9%, respectively.

The size and scale these firms offer make them attractive to financial advisors and to asset managers seeking shelf space. “The advantages of scale for B/Ds include the ability to spread fixed investments in areas such as infrastructure, technology, and regulatory compliance across a larger advisor force, which increases the return on those investments,” says Michael Rose, director. It also provides B/Ds with leverage to maximize revenue from asset managers for distribution in its various forms, including revenue sharing, strategic marketing costs, and data packages. “Scale provides B/Ds with stronger negotiating power over asset managers that rely on B/Ds and their financial advisors to distribute their products, to include their offerings in B/D home-office models, or to select them within portfolios that advisors directly manage,” he adds.

Scale, however, is not a panacea for the many challenges that face B/D firms. “A growing number of advisors are demonstrating dissatisfaction with the bureaucracy associated with working for a large financial institution and are choosing alternative affiliation options, particularly hybrid RIA and independent RIA affiliation,” says Rose. Cerulli recommends that B/D firms growing inorganically through M&A stay laser-focused on their firm cultures to ensure that their growth doesn’t have negative ramifications for advisor retention.




About Cerulli Associates
For over 30 years, Cerulli has provided global asset and wealth management firms with unmatched, actionable insights.
Headquartered in Boston with fully staffed offices in London and Singapore, Cerulli Associates is a global research and consulting firm that provides financial institutions with guidance in strategic positioning and new business development. Our analysts blend industry knowledge, original research, and data analysis to bring perspective to current market conditions and forecasts for future developments.