Barriers to Entry in Finance
Starting a business in finance is ridiculously expensive. The costs end up being a huge barrier to entry for new firms, particularly on the sell-side. Here’s just a sampling of the price of admission to get a new broker-dealer off the ground:
- Bloomberg Terminal: $2,500/month/user
- Form NMA submission (part of broker-dealer registration): $7,800
- Lawyers to guide you through broker-dealer process: $50,000 — $100,000
- Share of a FinOp: $5,000+/month
- Series 24 Test: $115/person (2 required) and Study Guide: $250
- Fingerprint cards: $30/person
- U-4 Registration: $100/person
- Fidelity Bond
- One year of operating capital
- Yearly maintenance fees
This list doesn’t include the time spent on your Form NMA (500+ hours) or negotiating clearing arrangements or any number of other things that have very little to do with the actual “business” you want to conduct.
There is zero desire to change any of this. The incumbents love these kinds of barriers to entry that keep pesky upstarts out.
