These are tough times for independent investment dealers because commodity prices have plummeted, but they should find some solace in knowing it has been worse.
As painful as this market can be for boutique investment banks, with most underwriting and advisory work flowing to the large bank-owned dealers, their situation is not nearly as dire as it was three years ago.
New figures compiled by the Investment Industry Association of Canada show that operating profit across all dealers hit $6.95-billion last year and is expected to come close to that again in 2015. Although the large "integrated" firms that offer everything from investment banking to wealth management platforms have generated 80 per cent of the fees, smaller institutional-focused firms as well as dealers that cater mostly to retail clients are making much more money than they did during 2012 – the last time people were panicking.
Three years ago, retail-focused firms collectively lost $18-million; this year they are expected to make $282-million, according to IIAC. Institutional-focused dealers, meanwhile, should see their collective profits jump by 70 per cent to $1.03-billion.
While profits are much higher than during 2012's commodity rout, it does not mean all firms are faring the same. Earlier this year, for instance, Edgecrest Capital shut down. Venerable dealers such as Canaccord Genuity and FirstEnergy have had layoffs.
As the commodity rout drags on, Canada continues to lose independent dealers. Since 2012, the total industry has shrunk by 11 per cent to 174 firms, according to IIAC.