By Michael Forman

The Street, be it Wall or Main, always looks healthier when the Bull chases away the Bear. That’s important to keep in mind when looking at our 2006 Brokerage Industry Rankings because the market and the alphabet soup of indicators used to take the industry’s pulse are the backdrop against which all other performance indicators must be considered. Was 2005 a good year in the market? Compared to the tech-driven days of the late 1990s, no. Compared to the years after the tech bubble burst, and the aftermath of 9/11, yes. However, regardless of market conditions, properly employed resources and talent along with skilled decision-making at firms can always go a long way towards mitigating the effects of weak or moribund markets. To a point, that is.

Good sailors can navigate all conditions but it’s the wind, like the market, the makes the rules and controls the environment. So what kind of environment did 2005’s market create? Suffice it to say that if the stock market was a college student it might have earned itself what used to be called a “Gentleman’s C.” Translation: it was there, it showed up, it received credit but left the class relatively unchanged. Consider that the DJIA opened trading for 2005 on January 3 at 10,784 and closed on December 30 at 10,717.50. That 0.6 difference represents the smallest annual change in the Dow in almost 100 years. It is therefore not all that surprising that average income for registered reps remained close to static from 2004 to 2005. When we last surveyed industry earnings for our 2004 report, which carried 2003’s data, average income was $124,112. Income for year-end 2005 came in at $121,337. Certainly not the poverty level, but far from the direction producers and the industry had hoped for. Fortunately, as our data shows, no one’s hair is turning gray from worry. The average age of producers around the country was 43 in our last survey, and that number has remained constant, as has the average length of employment in the industry, 10.5 years. So, like the person with one foot in a bucket of boiling water and the other foot in a bucket of ice who should, on the average, be quite comfortable, we might conclude that little happened in 2005. But that would hardly be the case, not in a year of continuing war, hurricanes, soaring oil prices, and even record profits for many corporations. No, if you look at macro numbers it appears 2005 might be a copy of the last two years, but as we drilled down we discovered nothing ever remains quite the same.


The statistical information was provided by Select Information Exchange, a 40-year-old financial data company that has maintained a comprehensive database of registered reps throughout the United States. The information was based initially on state registration information and then had estimated income information appended to the file. The number of reps at individual companies is overstated by an estimated 10 to 20 percent, because of those licensed brokers who choose to work in non-producing capacities. The geographical information provided is based on home, rather than work, addresses. Therefore a broker living in northern New Jersey but working in New York City would be counted as being in the former rather than the latter. But in an era of “metro areas” — perhaps defined best by New York City’s two pro football teams, neither of which actually plays in New York, such exact geographical distinctions aren’t too important. For the purposes of this report, incomes over $250,000 were considered as $250,000 and incomes under $50,000 were omitted. As such, income averages are more a median than a mean. Additionally, the income averages are based on estimated household income rather than individual income. So those brokers married to successful trial lawyers, movie stars, and heart surgeons will come out looking better than their colleagues whose spouses don’t work or work more modest professions. The averages created for age and years in the business are mean averages of age/years of reps in a category. There’s little to qualify about the former. If you’re 40, you’re 40, no matter how the numbers are crunched and no matter how often you deny it. Years in the business are a bit more daunting. We measure the years someone has an active broker’s license. So someone who works in the industry for three years, has a mid-life crisis and goes off to follow the Dalai Lama for five years — renewing his license as he goes — is counted as working in the business for those years. Although such mid-life crises do occur, we feel confident the majority of those who face them do so while remaining at their desks and computers. (Whether those people also buy red sports cars, is not relevant to this report.) Overall, averages were only created where 20 or more data points were available.

Income Averages

They Tell Us Nothing, They Tell Us Everything

Looking at average and even mean incomes is a lot like looking at the Dow or the S&P 500. Such stock indices hopefully provide a meaningful big picture while telling us nothing about how our individual equity holdings may be doing. (Unless of course you’re a confirmed index trader.) During any given stretch of time the Dow can be up while your personal shares are down. By the same token, the indices can be bleeding red while your stocks continue to make it into the winner’s column. In sum, you may be well above the average industry incomes, or struggling below that line. Macro numbers rarely nail any individual’s exact position. So, it’s fair to ask, what value are these averages? The most important answer is that they benchmark us, in this case of producer earnings they tell us as individuals how we are doing compared to our colleagues, and they tell us as an industry how we are doing compared to prior years. So what do the macro numbers tell us? Nationally, the average income for all brokers is $121,337.50, little different from the prior measured year. But there’s a lot behind that number. For example, it appears that licensing does make a difference to income. In this year’s snapshot commodity brokers (S3) once again reigned supreme. Also, not surprisingly, managers (S8) and principals of firms (S24) also out-earned the industry average. Nor should it be any more surprising that Series 1 brokers — those grandfathered into their Series 7 — did better than average being that they top the charts in both age and years of employment. Is there a conclusion to be drawn? There are several, but what jumps out is this: credentials and experience help, but it also doesn’t hurt to be the boss.

See PDF version for chart Stats by Series Exam.

Like Fine Wine You Should Be Getting Better With Age (at least as far as earnings are concerned)

The average income of producers tends to increase over time. And why shouldn’t it? Looking at it in purely statistical terms, the lowest earners tend to leave the business, thus removing the drag of their meager production from the mix. In real life terms, the longer you work the more clients you have and the greater the assets and wealth in your book of business. But a word of caution, the greatest growth in income occurs during the first 10 years of employment, the next decade is continued by more minimal growth, after that, growth tends to plateau on a percentage basis. But that shouldn’t be cause for despair. According to many industry experts, the first phase of a producer’s life is about gathering clients and building a book. After a point, they say, it’s about servicing that book of business. Candidly, say others, while your business may not grow as much in later years, your stress levels and the demands once placed on you to bring business through the door have eased up considerably.

Do Big Firms Mean Big Money?

The day of wire houses being “New York” firms while the rest of the country is divided between regionals and locals is over. You can find Merrill and PFS offices all over the country, and clearly no longer are all Edward D. Jones offices located near the closest Norman Rockwell painting. So what does it mean to your potential income if you choose to work for one of the larger firms? In truth, very little. By measuring firm size based on number of registered reps and comparing them to annual income, you come to the conclusion that of the many things that affect your income, firm size is not a make or break factor. Opportunities may be broader within larger firms — bigger firms tend to have larger lines of business, and a greater need for supervisors and managers, but that’s it. In 2005, Merrill Lynch’s 18,736 reps had an average income of $132.211, while at far smaller San Diego-based First Allied Securities, 385 brokers pulled in just over $134,000. Large firms generate lots of revenue, but on a broker-by-broker basis, earnings come from clients, not your firm. Note, as stated we count all registered reps, which means numbers of brokers listed is probably larger than the actual number of producers.

See PDF version for chart Stats by Type of Firm.

Looking Further: Going Independent

The traffic between full service brokerages and independent advisor firms has a decidedly one-way pattern; brokers move towards independence, that’s it. While thousands may not choose to leave their lives at wirehouses, regional and even local firms, once they’ve gone independent rarely do they return. What drives this one-way traffic? In a word, say experts, control. They want complete, or at least far greater, control over their relationships with their clients, more say in investment decisions and the opportunity to earn outside the brokerage industry’s carefully crafted compensation systems.

As one independent advisor told us, “I think everything about this life is better.”

But that simple analysis comes from some who has already managed to build up assets under management of close to $350 million. For those interested in making the move, and most brokers express such interest at some time in their career, the move can be fraught with perils.

“What’s the hardest part?” said one New England-based advisor. “That’s easy: the money you lose at the beginning.”

Many brokers who enter the hallowed halls of independence often see a drop in income of 25 percent or more in the first year or two. Often it can take three to five years to match the earning level left behind at their previous firm. There are several reasons that happens, say many. The first is that there’s simply a loss of business, i.e., clients don’t always follow you out the door. Second, in an effort to win or hold clients, newly independent advisors often charge fees that are attractive to winning clients rather than being conducive to earning a big living. Finally, and perhaps most important, many newly transitioning advisors don’t take the proper steps to set up their business.

According to the head of transitioning for one major national company, not everyone seeking independence realizes that they’re not just handling assets, they are also running their own business, and that requires a whole other set of skills.

“Suddenly there’s no big firm taking care of you. You are the one making decisions about hiring, technology, office management and administration, all those things you’ve always taken for granted,” he said.

That’s the reason, he continued, that while going independent may be a life long dream of many brokers, the transition is frequently more successful for younger producers.

“As with anything, there are ideal times to act and younger brokers tend to have more energy to devote to all aspects of building a business. Older brokers may have the book of business, but don’t have drive or energy to start a business from the ground floor,” he said.

Ultimately, say many, probably not more than a quarter of all successful producers have the overall business skills to go out on their own.

Meet You In St. Louis, or At Least Milwaukee

According to Fortune magazine’s “Top 100 Companies to Work For” the three best brokerages are Edward D. Jones (16th), Robert W. Baird (31st) and AG Edwards (70th). Those rankings confirm the finding of other industry surveys that typically place regionals ahead of wire houses — when ranked by broker satisfaction — and almost always place the St. Louis twins at the top of the list. What makes these firms the best to work for? Most frequently cited are management style, corporate culture, and training. What doesn’t enter into the equation is St. Louis itself, given that vast majority of reps for these firms are spread out across the country. Unless, of course, there is a St. Louis sensibility passed down the line.

Given the Choice Where Would You Work?

Who doesn’t want to maximize their income? While helping customers achieve their financial goals and maintaining life-long relationships with clients offers much career satisfaction, most brokers like to pair those intangibles with the largest possible income. As we’ve seen, such factors as age, position and credentials play a big part in earnings. But what about location? Do brokers in the New York area pull down more bucks than their Sunbelt colleagues? Do big-city offices provide you with bigger money than digs in smaller metro areas? It is difficult to say exactly. The chart below will let you draw your own conclusions. But, in the meantime, something to consider: the area of the country that is closest to the overall earnings average of $121,337 is St. Louis, where brokers averaged $121,543 in 2005. That’s pretty remarkable since among the many things St. Louis in noted for — e.g., the Cardinals, riverboat gambling — it is, as the great Arch symbolizes, the gateway to the West. It’s not America’s geographical center, but historically it has played that symbolic role. It is also capital of the Show Me State. With that in mind we show you the top 42 locations as ranked by broker income. Remember, this list is built around home addresses, not business addresses. So while Fairfield, CT, tops the list once again, it is reasonable to assume that those brokers, along with their very high earning colleagues from Northern New Jersey. sit close to one another in many metro area New York offices.

See PDF version for chart Top Cities by Broker Earnings.

But Does it Really Pay? The High Cost of Living

Income is one thing but assets are another. Remember the old saying, “it’s not what you earn, it’s what you keep.” So while Fairfield, CT, San Francisco and Orange County, CA, may provide the addresses of the industry’s top earners, they are also among the country’s most expensive places to live. According to, the average cost of a house in Fairfield in 2005 was $336,118.00. Add to that a state income tax of 5 percent for those in the highest bracket (and who in Fairfield isn’t in the highest bracket?) The median home price in San Francisco is $711,157 with a top bracket state income tax of 9.3 percent. Now compare those numbers to San Antonio, where brokers earned an average of $103,00 in 2005 and the average cost of a house is $122,000. That, by the way, in a state that charges no state income tax.

See PDF version for chart Where the Veterans Work.

It’s So Great Working Here, I Never Want to Leave

Since the end of the 1950s we have increasingly become a nation on the move. Americans change jobs and change addresses far more than they did in the past. Experts cite everything from corporate transfers, divorces, geographical capital shifts and even improved communications technologies as reasons. Yes, many of us stay put, and it is possible some of us still marry the “girl next door.” But if so, in this day and age it’s increasingly likely she is someone who just moved to town a year ago. So what cities tend to keep brokers the longest? What cities are brokers most likely to have shorter stints of employment? The top city on our longevity list is, as measured by years in the business, is Honolulu where brokers stay an average of just over 15 years. At the bottom of our list is Orlando, where the average length of employment is seven years. Why? Hard to say. In the case of Honolulu we’re tempted to answer “are you kidding? It’s in Hawaii!” As for Orlando, Disney parks may naturally attract a younger crowd….

Looking Further: What Makes a Great Place to Work

For reps, changing jobs can be an iffy proposition. It takes years to build a stable and profitable book of business, and many producers are rightly concerned that some of their hard-won clients won’t follow them should they hang their shingle somewhere new. The firms themselves have equal concerns: having invested in training and support, they don’t want to see their producers walk out the door and take with them lucrative business that, they feel, rightly belongs to them. While 100-percent producer retention is, to say the least, unlikely, the establishment of a positive and supportive work environment goes a long way towards building and keeping a productive workforce. As part of this report we asked producers what makes a great environment. From their responses we drew this conclusion — there’s no mystery at work here, great work situations are created when management makes broker satisfaction a top priority.

According to several reps at both Edward D. Jones and AG Edwards, two of the firms habitually cited as having the industry’s top level of broker satisfaction, the best thing a firm can do is support its producers and not burden them with overly aggressive sales quotas and demands. Said one AG Edwards broker: “Too many firms see you as a commodity — how much can they get out of you? At Edwards, the mentality from the beginning is ‘what can we do to support your growth?’”

An Edward D. Jones broker in one of the company’s New England offices echoes a similar sentiment. “I started working at one of the big firms in New York and from the get-go I felt like a source a revenue, nothing more, nothing less — and never enough of a source of revenue to satisfy my branch manager. Never did I feel like an actual person. Here I’ve been successful because the firm sees all its associates as people, and respects them completely.”

At both firms, as well as others where the satisfaction index runs high, brokers cite realistic sales quotas, lack of pressure to push certain products, and acknowledgement that it takes time to build business. They also cite the right amount of sales support and ongoing training.

“There’s never a feeling that you’re just thrown into combat and forced to survive or perish. Instead, there’s a feeling that there’s an important job to be done and the company wants to give you the tools and support to get it done. Personally, I can’t see working anywhere else,” said a St. Louis-based Edwards broker.

Finally, said many, the best firms acknowledge that the broker/firm relationship is one for the long haul. As such, the support and resources for continuing education and growth are a high priority.

Looking Further: The World of the Heavy Hitter

What does it take to enter that rarified place where your book of business is thicker than a Russian novel and your assets under management end with as many zeros as a baseball scoreboard after a shutout?

“It takes creativity, industry, unbelievably long hours, constant attention to your own goals, a willingness to break out of the mold, and, if I didn’t mention it, unbelievably long hours,” said a Merrill producer whose book of business is close to a quarter of a billion dollars.

It also takes time, he said, citing his own 20 years of experience and 18-hour workdays. “Most brokers claim to want top tier success but very few people are really willing to put in the incredible amount of time and energy to make it happen,” he said.

According to many top tier producers, drive, motivation and energy by themselves are not enough. Top producers, they say, tend to be very skilled goal setters.

“Being a good goal setter is very different than being a high goal setter,” said one high earning Smith Barney broker. “Setting high but unattainable goals, or goals you are not ready to achieve is destructive. At best it gets you used to falling short — and used to making excuses — at worst it makes you feel like a failure. I’ve seen many brokers who adopt the view that they’re failing not because they’re doing poorly but because they can’t live up to their own unrealistic goals.”

Most highly successful producers seem to have an innate ability to set reachable goals; the kind of goals that allow them to leverage off strings of increasing successes. For those not born with such natural ability, the use of a coach usually helps.

“Goals are most typically reached when there is someone else who knows what they are, and someone who can provide objective strategies to help them be obtained,” said one wirehouse branch manager who has managed several high earning brokers.

And, he continued, the goals themselves are rarely the most important part; it’s the willingness to do what needs to be done to reach those goals. “Few people,” he said, “can make it to the very top without some personal overhaul, whether it’s learning greater communication skills, enhanced sales skills [or], maybe most important, the ability to make the firm responsive to their clients’ needs.”

That last point appears to be key. Each of the high earners we spoke to said that mega-success requires your firm work for you rather than the other way around.

“No one manages hundreds of millions of dollars without being integrally part of firm decisions and policies. It cannot be overstated that huge net worth clients do not see themselves as just another customer of the firm, they tend to see all the resources of the firm as being there for them. If you can’t sustain that belief and make it a reality, you can’t hold their business. The client always comes first,” said the Smith Barney producer.

Women and Diversity

According to the Securities Industry Association (SIA), the overall employment of women and minorities in the securities industry workforce continues to grow. At its annual meeting in Boca Raton, FL the SIA released its “2005 Report on Diversity Strategy, Development & Demographics.” That report notes that since 2003, women have climbed from 7 percent to 44 percent of all employees in SIA member firms. People of color have increased to 21 percent of the workforce, up from 18 percent in 2003. Additionally, nearly one-fourth of senior-level positions, and over one-third of mid-level positions and analyst and associate positions are held by people of color. In our last survey we counted 110,000 female registered reps. This year that number increased to 157,015.

Generating the Highest Income

Logic dictates that among the firms generating the highest average income per broker would be those specializing in institutional business. Therefore it is not surprising that Bear Stearns’ 1,477 brokers would lead the pack of large firms with average earnings of $161,471. There were many small boutique firms (or small specialized units of large firms) with even higher average incomes. What do the top firms, and the other industry leaders, have in common? Experience for one thing; the average broker in 2005 had 10.5 years of experience, while brokers at these firms tended to have significantly more time in the business. Geography also helps. The highest incomes per rep were often associated with firms located in San Francisco, Los Angeles, and New York/CT.

At the Close, Some Good News

According to joint SIA/ICI study, equity ownership in the United States has grown significantly over the past two decades. Currently, half of all households and one in three individuals own equities. That means nearly 57 million U.S. households own stocks. While many of those holdings are in mutual funds and pension plans, stock ownership does bring individuals into the market, which, for brokers and brokerages is never a bad thing. Finally, after a very weak 2004, brokerage stocks themselves appear to be rebounding. The S&P 500 Investment Banking & Brokerage group, which has all sectors in its basket, has slowly begun to outperform the overall market. Is there a message there? Maybe this: When investors begin looking at brokerage stocks as places to put their money, it’s a sure bet things are on the upswing.

See PDF version for chart Income Rankings by Firm.