Commission-sales reductions could impact investors

Thomas Coyle

10 July 2009

Institutional brokerage commissions set to shrink by nearly 25% this year. Fee-only advisors who cast envious glances at their commission-based rivals as clients scrambled to rebalance their portfolios in recent months may take a measure of consolation from a prediction by Greenwich Associates. The Stamford, Conn.-based consultancy says that sell-side firms will see a 23% drop in revenue derived from equity trades for 2009 and a 32% slide in hedge-fund commissions. Rather than auguring especially well for non-commission businesses, however, this reduction in commission sales could result in cutbacks on research and other vital services at a time when investors are most in need of them.

Commissions paid by U.S. institutions to equity brokers for domestic-stock trades between February 2008 and February 2009 increased 12% to $13.7 billion. But a decline this like the one Greenwich envisions could lead to contraction just as Wall Street starts to show signs of life -- ironically enough, as a direct result of increased trading activity in the first quarter of 2009.

Pressure points

"Any significant reduction services." -FWR

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