Stockbrokers Are Dead (2024)

Stockbrokers no longer exist. They are either retired or dead.Today's version of stockbrokers are known as Investment Advisors, Financial Advisors, Wealth Advisors or any other dozen (or so) monikers. This demise was rapid, it happened in the last 25 years and it started with my entry into the brokerage industry in 1994.

Back then, in an attempt to bring down the huge swings in trading revenue, Merrill Lynch hired McKinsey to consult. Up to that point commissions were king, in bullish stock markets revenues were sky high, in corrections and crashes revenues dried up. The model proposed by McKinsey, logically enough, was to charge clients fees and not commissions.

In Canada, two other developments further helped change the profession of stockbroker. Government legislation against unsollicited phone calls (No Call Lists) effectively killed the number one sales tool of stockbrokers, namely, cold calling. The second development was the destruction of the "Four Pillars" of the financial system (Trust, Insurance, Banking, and Securities) which has now become a blurred entity known as the Financial Services Industry. As banks bought brokerages a huge amount of referral and cross-selling allowed investors to have "one stop financial shopping" and it gave brokers a flood of referral business.

Suddenly the skills of cold calling, stock picking, and revenue generation (OK, churning) were obsolete. As the securities industry changed, clients wanted a more holistic approach. The brokers who adapted, or the new hires, became well versed in insurance, estate planning, and financial planning. The old school stockbroker who knew a tremendous amount about gold mines or technical analysis or closed-end mutual funds- or any other arcane area of the market- was no longer needed. Besides, if a client wanted to trade a lot why not use the discount brokerage (that the bank also owned) at a fraction of the cost?

The world of brokerage has changed considerably since my first job as a cold caller at Nesbitt Thomson in 1994. The faces and memories of the cold-calling, stock-picking, hard-working brokers, now passed, still remain. I suppose that a person starting in our industry today will probably feel that same tinge of nostalgia 25 years from now as I do today. To paraphrase Gordon Gekko "Change, for lack of a better name, is good".