Broker Dealer Guide: 2025 Edition

Practical advice for thriving in the evolving broker-dealer landscape and improving technology selection.

What Is a Broker-Dealer, and How Do They Operate?

A broker-dealer is a financial firm or individual authorized to buy and sell securities both for clients and for itself. The broker-dealer’s dual role is central to the financial ecosystem, providing essential services like trade execution, market making, underwriting, and liquidity provision. In 2025, industry numbers reflect consolidation: FINRA-registered broker-dealer firms have declined by 30% since 2010 (to 3,340 firms), yet assets have reached $6.4 trillion, showing scale and resilience.

The number of FINRA-registered broker-dealer firms has declined by 30% from 2010 to 2024, reflecting significant industry consolidation

Objective: This guide empowers finance professionals to understand broker-dealer definitions, explore modern business models, review industry trends, and apply technology selection best practices to thrive in today’s market.

Defining the Broker-Dealer Role

Broker-dealers combine two central functions:

• Broker (agent): Executes trades for clients and earns commissions.​
• Dealer (principal): Trades securities for its own account, profiting from price differences.​

Acting as both agent and principal brings flexibility but also unique regulatory and ethical challenges.

Broker vs. Dealer: A Critical Distinction

Key Services Provided by Broker-Dealers

• Trade Execution: Facilitating client trades on exchanges and OTC markets.​
• Market Making: Ensuring liquidity by quoting buy/sell prices and trading continuously.​
• Underwriting: Assisting firms with IPOs and security offerings.​
• Mergers & Acquisitions: Advising on corporate transactions and deals.​
• Investment Research: Providing analysis, data, and recommendations.​
• Wealth Management: Delivering financial planning and advisory services.​

Broker-Dealer Business Models and Revenue

Modern broker-dealers have shifted from commission-heavy models to fee-based and trading-oriented income streams.

Revenue model transformation showing the shift from commission-based to fee-based and trading income models in the broker-dealer industry from 2010 to 2024

How Broker-Dealers Generate Income

• Commissions and Fees: Revenues for trade execution and client services (now just 5% of industry total, down from 18% in 2010).
• Advisory/Admin Fees: Growing segment; asset-based charges for ongoing financial advice (rose to 19% from 13%).
• Proprietary Trading: Income from the firm’s own buying/selling activity; often boosted by automated and AI-driven strategies.​
• Underwriting Revenue: Fees from facilitating IPOs or security issues for clients.​
• Payment for Order Flow: Income from routing client orders to market makers.​
• Securities Lending/Margin Interest: Supplementary profits from lending securities or client cash.​

Broker-Dealer Revenue Model Transformation (2010-2024)

Understanding Dealer Markets

Dealer markets primarily OTC enable continuous liquidity by allowing participants to trade directly with dealers who own inventory. Dealers quote bid and ask prices, profiting from spreads and supporting less liquid assets (bonds, derivatives). Rapid digitalization, automated systems, and AI have narrowed spreads and raised efficiency, dramatically shaping the market landscape.​

Regulation, Compliance, and Ethics

Regulatory oversight shapes every aspect of broker-dealer operations, placing a strong focus on investor protection, transparency, and ethical conduct.

Primary Regulatory Bodies (SEC and FINRA)

• SEC: Federal authority over securities firms; defines market rules, conducts exams, and enforces regulatory actions.​
• FINRA: Self-regulatory organization overseeing broker-dealer conduct and member compliance; supervises trading activities, records, and communications.​

Recent priorities:

• Cybersecurity preparedness and vendor risk oversight.​
• Reg BI (Best Interest) compliance and documentation.​
• Supervisory controls for remote work and electronic communication supervision.​
• Disclosure and suitability for complex products.​

Potential Conflicts of Interest

Key ethical challenges in broker-dealer practice:

• Favoring proprietary products for higher payouts.​
• Order routing conflicts due to payment for order flow arrangements.​
• Principal trading risk selling from firm’s inventory, not always aligned with client’s interest.​
• Churning (excessive trading) for commission revenue, risking client returns.​
• Front-running trading ahead of client orders based on confidential information.​

Regulation Best Interest requires clear disclosure and processes to ensure client priorities.​

Career Path: How to Become a Broker-Dealer

Successful entry into the broker-dealer industry demands financial expertise, compliance proficiency, and now technology fluency.

Required Education and Licensing

1. Bachelor’s Degree: Preferred majors include finance, economics, or business administration.​
2. Employer Sponsorship: Must secure a position with a FINRA-member firm.​
3. Series 7 Exam: Qualifies representatives to sell a broad range of securities.​
4. State Registration: Pass Series 63/66 for state-level compliance.​
5. Continuing Education: Complete regulatory CE and annual firm training.​
6. Technology Skills: Familiarity with advanced platforms (e.g., ETNA Trader) is increasingly important for advisor roles and trading analysts.​
   • ETNA Trader offers multi-asset capabilities, algorithmic trading, and robust compliance features for modern broker-dealers.​

Average Compensation and Career Outlook

Industry trends:

• Over 634,000 registered individuals in 2024, with dual-registered professionals (BD+IAR) on the rise.​
• Large firms control 82%+ of reps and branches, offering better resources but steep competition.​
• An aging advisor workforce creates an opportunity for new entrants with strong tech skills.​

Summary and Key Takeaway

Broker-dealers remain vital for liquidity, price discovery, and capital access in financial markets. The 2025 landscape rewards firms embracing automation, AI, consolidation, and compliance. Success depends on:

• Technology-driven business models and integrated platforms.​
• Rigorous compliance programs responding to evolving SEC/FINRA priorities.​
• Talent strategies integrating advisory, analytical, and digital skillsets.​

Industry consolidation, fee-based advisory growth, and AI innovation will continue to reshape the broker-dealer role. For aspiring professionals and established firms, continuous learning, strategic tech selection, and robust ethics offer the surest route to thriving in the new broker-dealer environment.