Los Angeles, California (PRWEB) October 25, 2011
The Securities Brokering industry revenue is expected to grow at an average annual rate of 1.7% to $169.6 billion over the five years to 2016, according to IBISWorld, the nation’s largest publisher of industry research. In 2012, the industry will experience a second consecutive year of positive growth as investors slowly regain confidence in the markets and demand for financial advisory services increases. IBISWorld projects revenue to grow 5.0% in 2012. This growth will attract more investors into the markets and increase trading volume, commissions and overall revenue. Also, a large portion of revenue growth for operators will be based on the expansion of activities outside of securities brokerage, including financial advisory and wealth management services.
Despite the lackluster recovery in the post-recession performance of the greater financial sector, Securities Brokering industry continues its strong recovery in 2011. The industry is unique in that total revenue does not directly dependent upon capital markets, but on high market trading volume and client assets under management. While the value of client assets fluctuate slightly with capital markets, brokerage firms charge fixed asset-based fees, earn interest on appreciating client assets, and draw revenue primarily from trade commissions which increase in capital market upswings and downswings.
According to IBISWorld analyst Doug Kelly, over the five years to 2011, revenue in the Securities Brokering industry decreased 1.9% on average, mainly due to a disastrous 2008 when revenue fell 54.0% during the subprime mortgage crisis. “Profit decreased at a faster 3.2% due to costly technology upgrades, increased trading costs and intense pricing pressure from industry players," says Kelly. “The industry remains highly profitable, however, with profit comprising 36.5% of total revenue.”
So far, 2011 trade volume is down 46.3% on the year. However, the average growth rate for assets under management at the top four industry leaders was 4.1% through the first three quarters, while discount broker leaders Charles Schwab and TD Ameritrade saw a respective 22.0% and 17.0% growth in client assets. The strong growth in asset-based revenue off appreciating client assets is projected to boost industry revenue 14.5% to $155.6 billion and profit 15.9% to $57.0 million in 2011, despite declining trade commissions and poor S&P 500 performance.
Security brokerage firms have responded to falling profitability by increasing their financial services offerings, and transitioning to an asset-based fee model characteristic of the financial advisory industry. IBISWorld estimates the industry will rebound from 2011 to 2016 with 1.7% growth in revenue to $169.6 billion, because recent mergers and acquisitions (M&As) will cause firms to capitalize on operational synergies, larger client bases and new financial advisory business segments. The future profitability of firms will vary widely based on the mix of financial services that firms branch into, their ability to adapt to technological change and the success of future M&A activity.
For more information, download the full report from IBISWorld on the Securities brokering industry
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Industry Life Cycle
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Recognized as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every US industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.
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