Buoyed by strong stock markets, which underpinned active trading and rising assets, the U.S. retail brokerage sector posted strong results in the first half, Fitch Ratings says.
In a report published Tuesday, the rating agency noted that retail brokers and wealth managers saw net revenues rise 19% on a year-over-year basis in the first half. Pre-tax earnings were up 28% for the same period.
“Solid client asset gathering, resilient equity markets, and healthy advisor productivity supported operating performance,” Fitch said.
Client assets grew 20% year over year on average for the sector, it reported, noting that assets hit record levels due to a combination of “net new asset generation, advisor recruiting, and favourable markets.”
Additionally, trading activity was “robust” in the first half amid elevated market volatility, it noted.
The sector’s margin trends “were more idiosyncratic,” the report said, with some firms enjoying continued margin growth, while others faced modest pressure on their margins — trends that were being driven by “firm-specific integration costs, technology investment, and a competitive advisor recruiting environment.”
Merger and acquisition activity was also active in the first half, Fitch said. The rating agency expects industry consolidation to remain an ongoing feature of the sector.
Finally, Fitch noted that while industry management teams continue to characterize AI as a “productivity enhancer” for both advisors and firms’ operations, it believes that the sector is facing “elevated AI-driven business model risk, as model portfolios, direct indexing and product selection could become increasingly commoditized.”