Eric Schwartz Sees Massive Consolidation Ahead In The Broker-Dealer Space

Tuesday, January 03, 2012 11:30
Eric Schwartz Sees Massive Consolidation Ahead In The Broker-Dealer Space

Tags: broker-dealers

Eric Schwartz of Cambridge Investment Research is a true pioneer in the financial services industry. After a year of brokerage firms shutting down for various reasons, his forecast of big M&A on the horizon should be taken seriously. 

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Schwartz told Investment News that "in 10 or 12 years, there will be only seven or eight broker-dealers doing 80% of the business."


That's across all independent channels: regional, insurer-owned, the works.


Right now, FINRA has a little under 4,500 member firms -- down 10% since 2006, but still a vast universe of licensed entities.


Getting from here to Schwartz's narrower list of firms that matter in the 2020s will take serious industry upheaval.


Which names will remain relevant? Obviously, LPL and Raymond James are not going anywhere, barring disaster.


AXA and Commonwealth are also pretty big.


But moving into the bulge bracket of firms that bring in maybe $200 million to $400 million in revenue -- including Cambridge, by the way -- you've got maybe 20 big companies that need to find dance partners.


Many of them, as Schwartz notes, are currently owned by insurance companies. Will they mark these units for sale as the annuity business changes?


Either way, interesting times, as they say.




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