Brighter days may be on the horizon for the U.S. retail brokerage business, amid improving market conditions and structural reforms among the firms, according to a new report from Fitch Ratings.

The rating agency says that retail brokers in the U.S. are enjoying the cyclical benefits of improving market conditions. And, at the same time, it says that structural changes in their business models “may support more permanent improvements in their performance.”

Fitch says that stronger equity markets have helped drive earnings growth for retail brokers over the last year, as retail investors have returned to the markets. “This has driven improved trading activity and higher fees in the asset management businesses,” it says.

Additionally, the rating agency says that the retail broker business model continues to evolve, as the firms look to increase their wallet share with customers. These tactics include offering various banking products as well as multiple wealth management products to their clients, it says.

“To the extent that retail brokers are successful in this effort… it will create a more durable business model and stickier customer relationships,” Fitch says. “The sticky relationships are important because they help cement deposit relationships.”

Additionally, Fitch says that retail brokers’ sensitivity to higher short-term interest rates, “further underscores the importance of deposits because it will allow the retail brokers to lag deposit re-pricing relative to asset re-pricing, when short-term rates eventually rise.”

Price competition, in terms of trading commissions, has been modest over the past year, Fitch says, although it says that it is likely to increase over time. Fitch believes that reduced trading commissions “will be more significantly used as a marketing tool to attract more asset or wealth management business.” And, it notes that retail brokers with scale and diversified revenue will be best positioned to manage this sort of pricing pressure.

Fitch also says that it believes some industry consolidation is possible. For example, it notes that E-Trade Financial Corp. is winding down its legacy mortgage exposure, which it says increases the likelihood that it will be acquired.