In this business, the large firms get larger, and the small firms go out of business or get bought. According to IEP’s Gregg, the attrition rate of small firms—typically those with under 150 reps—is currently 12-14 percent per year. Meanwhile, the top five IBDs by assets are consolidating asset market share, which rose to 50.6 percent in 2011 from 41.6 percent in 2008, according to Cerulli Associates.

But if you can achieve scale, the IBD business can be profitable, analysts say. The idea is, the larger a firm gets, the higher the fees for distributing products from a third party provider, says Bernstein’s Hintz.

“A Wal-Mart can extract more from a Procter & Gamble than Bob’s Bodega can from Procter & Gamble,” Hintz says. “If you have enough brokers pushing product for you, that third-party provider is going to pay more, be more interested in you and you’ll go up in terms of the pricing you’re able to get from that third-party provider.”