Stock-Brokerage Industry Enters the Twilight Years
Technology makes it easier to start an independent firm, while more salespeople shift from earning commissions to charging fees.
Bloomberg, July 19, 2017
I begin today’s column with a mea culpa: I have been expecting the imminent death of the brokerage industry for about 20 years. This is something I have been dead wrong about.
Since the mid-1990s, I have been astonished by the idea that anyone would ever buy stocks over the phone from a cold-calling 1 stranger; I couldn’t believe that anyone would find the large advertising campaigns for expensive products persuasive; or that something as important as saving for buying a home, or paying for your kids’ college or even retirement could be treated so cavalierly.
Despite my insistent warnings, brokers have — wisely as it turns out — ignored my entreaties over those decades to move away from a commission-based model and toward a fee-based one.
I have since wised up. A combination of years of experience and a deep, decades-long dive into behavioral finance has provided lots of insight into the way investors’ operate. Emotions remain a powerful driver of investor behavior, and very good sales people know precisely how to use this to their advantage.
I was reminded of this courtesy of a Wall Street Journal article today with the headline “Brokers’ Call on Wall Street: Bye“:
Wall Street’s brokerage model is under assault—from within . . .
Continues at: Stock-Brokerage Industry Enters the Twilight Years