The role of a stockbroker has become far less prominent in the modern era. This is particularly interesting when you consider the power and wealth stockbrokers were amassing following the economic boom of 1920s and 1990s, compared to now, where the job has become a shadow of its former self. So, what happened? Was it AI? Was it the rise of Hedge Funds? Or was it stricter regulations? In this article I will explore the main events that contributed to the sharp rises and eventual fall of the stockbroker job, primarily focusing on U.S stockbrokers and their history due to the U.S being home to the largest stock exchange.  

Early History 

For those with limited knowledge of the financial world, a stockbroker is a financial professional who facilitates the buying and selling of stocks and other securities on behalf of clients, serving as a link between investors and the stock market. The modern stockbroker emerged with the formation of the world’s first stock exchange, which was the Amsterdam stock exchange in 1602¹ . However, stockbrokers only became professionalised in the 1800’s, following the birth of the New York Stock Exchange² , which would go on to become the biggest stock exchange in the world³ . Stockbrokers became licensed and began to work for brokerage firms rather than as independent traders. The first time the stockbroker profession saw a significant rise in popularity and income was during the 1920s economic boom.  

The 1920s economic boom 

After the end of World War I (1918), the U.S. economy entered a phase of rapid industrial growth and innovation⁴, especially in sectors like automobiles, consumer goods, and technology. This economic expansion led to increased business profits, which in turn led to a rise in stock prices and an increasing number of people wanting to invest in the market. This can be seen in the following graph below: 

By evaluating this graph, we can see that from 1921 to 1929 there is a general increase in the DJIA value, which indicates increased stock prices. As stock prices increase, both retail and institutional investors are more likely to buy or sell stocks, either to capitalise on profit opportunities or to benefit from the expanding market. This surge in activity results in higher trading volumes, which directly benefits stockbrokers, as they earn commissions or fees for every trade they facilitate. To ensure they could get the most out of this booming market stockbrokers also developed aggressive promotion strategies encouraging clients to invest more heavily, including advising them to use margin⁵ .  

Some brokers took it a step further by pushing “hot tips” and speculative stocks, often without fully explaining the associated risks. This strategy boosted trading volumes and generated significant commission earnings for the brokers. The surge in demand for stocks driven by this speculative activity caused prices to soar, contributing to an atmosphere of irrational optimism, where stock prices kept rising without much consideration for the true financial health of the companies involved. This period of economic growth and new tactics by stockbrokers led to stockbrokers earning large amounts of money via commission, especially since the number of shares being sold increased significantly. In 1925, annual trading volume was approximately 1.6 billion shares, and in 1926, it was about 1.5 billion shares. By 1929, this volume had risen to 2.5 billion shares, indicating a substantial increase in trading activity over the decade⁶ . However, this period of growth in the stockbroker position would soon come crashing down with the Wall Street crash of 1929. 

Wall Street crash of 1929 

The 1929 Wall Street Crash resulted from several interrelated factors that fueled an unstable market. Speculative trading, with many investors buying stocks on margin (borrowing money to invest), drove stock prices to unsustainable levels. Meanwhile, underlying economic issues like overproduction, weakening demand, and rising unemployment weren’t reflected in the market. As stock prices began to fall, investors were forced to sell to cover margin calls, sparking a wave of panic selling. The tightening of credit further intensified the crisis, making it difficult for investors to manage their losses. The lack of regulation allowed risky practices to continue unchecked, and the crash culminated in dramatic losses on October 24 (Black Thursday) and October 29 (Black Tuesday), leading to widespread panic and setting the stage for the Great Depression. 

In 1929, the New York Stock Exchange (NYSE) saw millions of shares traded daily, but after the crash, these numbers plummeted. On Black Thursday (October 24, 1929), the market saw a high of 12.9 million shares traded, but this was quickly followed by a sharp decline⁷ in activity as panic selling took hold. As a result, stockbrokers experienced a significant drop in commission revenue. Aside from just less revenue, The financial strain from the crash caused many brokerage firms to go bankrupt or merge. Smaller firms, which had relied heavily on commissions from margin trading and speculative investments, were hit particularly hard and collapsed. As a result, many firms couldn’t recover and had to shut down, leading to significant job losses for stockbrokers⁸.  

The Great depression followed the wall street crash, and it appeared the stockbroker would never return to its former glory. That is until the 1990s, where it would reach the peak of its power 

A new beginning in the 1990s 

The 1990s were a pivotal time for stockbrokers, driven by technological advancements, changes in market dynamics, and the growth of individual investors. During this period, the stock market experienced a significant boom, sparked by factors like the rise of the dot-com industry, low interest rates, and the growing popularity of retirement accounts such as 401(k)s. As the economy expanded and more people began looking to invest, the demand for stockbrokers surged⁹, especially those working at retail brokerage firms that focused on serving individual investors. Here is a graph showing the ‘boom’ of the market during this period:  

Similar to the 1920s, we can see that by observing the price of the DJIA that 1990s was also a period of significant economic expansion. During the 1990s, stockbrokers saw significant benefits from the booming stock market, which experienced impressive growth. Major indices like the S&P 500 saw notable gains, particularly in the late 1990s, spurred by the rise of technology companies and the dot-com bubble¹⁰. This surge in the market attracted a new wave of investors, with stockbrokers playing an essential role in guiding them through an increasingly complex array of investment options. As trading volumes soared, stockbroker commissions also rose, enabling brokers to earn more from the growing number of client transactions. 

In the 1990s, the role of stockbrokers within larger financial institutions began to evolve. Numerous brokerage firms merged with or were bought by major banks and investment companies, forming full-service financial institutions that provided a broader array of services, such as investment advice and wealth management. This change increased the importance of stockbrokers in the industry, as they became integral members of advisory teams offering more comprehensive financial solutions. Additionally, the growth of retail brokerage firms brought more professionalism to the field, requiring brokers to earn certifications, complete extensive training, and follow stricter regulations¹¹. 

We can see the parallels with the 1920s, however in the 1990s the stockbroker has become even more prominent. By 1929, total trading volume on the NYSE was estimated to be around $82 billion worth of stocks¹². This is based on the trading activity of shares through the year and increased speculative activity during the boom. In 1999, the total value of trading on the NYSE reached over $250 billion, marking a more than threefold increase in trading volume compared to 1929¹³. The stockbroker is now in a period where more shares are being sold than ever, and more revenue is being generated than ever. Everything is perfect for them. So, from here, how did it all go wrong? 

2000s to the present day 

At the turn of the century, advancements in technology began reshaping the role of stockbrokers. Online trading platforms such as E-Trade, Charles Schwab, and TD Ameritrade gained traction, allowing investors to trade stocks independently. This shift reduced reliance on traditional brokers, as more people embraced self-directed investing. With the increasing accessibility of the internet, retail investors moved away from brokerage firms and towards digital platforms that offered direct access to the stock market¹⁴. 

By the mid-2000s, competition among brokerage firms intensified, leading to a steady decline in trading commission fees. In previous decades, stockbrokers had profited significantly from commissions on each trade, but as online discount brokers emerged, they undercut traditional firms by offering much lower fees. The industry began transitioning away from commission-based revenue, forcing many brokers to adopt advisory roles rather than focusing solely on executing trades¹⁵. 

The 2008 financial crisis marked another turning point for stockbrokers. The market collapse prompted new regulations, such as the Dodd-Frank Act, which aimed to prevent excessive risk-taking in financial markets. Investors, shaken by the crash, shifted towards passive investment strategies, such as ETFs and index funds, rather than speculative stock-picking. Many brokerage firms faced consolidation or closures, reducing opportunities for brokers. As a result, the profession increasingly shifted towards financial advisory services, as clients sought more holistic wealth management solutions rather than simply placing trades¹⁶. 

In 2019, the brokerage industry underwent a major shift when Robinhood popularized zero-commission trading, forcing major firms such as Charles Schwab, TD Ameritrade, and Fidelity to eliminate fees on stock trades. With commission-based revenue disappearing, traditional stockbrokers could no longer rely on transaction fees as a primary income source. This forced many to transition into financial planning and wealth management roles, where they could offer broader advisory services rather than simply executing trades¹⁷ . 

The traditional role of stockbrokers has significantly diminished in recent years, largely due to technological advancements and the rise of digital platforms. Online brokerages and trading platforms have democratized stock trading, allowing wider public participation and reducing barriers to entry such as high fees and minimum balances¹⁸. Additionally, the emergence of robo-advisors—automated platforms leveraging artificial intelligence to provide financial advice and manage investment portfolios—has further transformed the investment landscape¹⁹. These developments have led to a decline in the traditional stockbroker profession, as individual investors increasingly handle their trades through digital platforms and automated services. 

Conclusion 

Over the years, the role of stockbrokers has undergone dramatic changes. In the 1920s, stockbrokers thrived during a period of rapid market growth fueled by speculation and rising stock prices. Their commissions were a key source of income, and brokers played a vital role in the market boom. A similar surge occurred in the 1990s, as technology companies dominated the market, and the dot-com revolution attracted a new wave of investors. Stockbrokers benefited greatly from the increased trading volumes during this time. However, by the early 2000s, technological advancements, particularly the rise of online trading platforms like E-Trade and TD Ameritrade, began to erode the traditional stockbroker’s role. The emergence of robo-advisors and AI-driven tools in the 2010s further diminished the demand for traditional brokers, pushing them to shift towards offering wealth management and financial advisory services. Today, with the dominance of digital platforms, stockbrokers have mostly moved away from trade execution, now focusing on financial planning and advisory roles. As a result, the stockbroker profession has transformed significantly in response to the ongoing digitalization of finance. 

References

ⁱ Petram, L. (2014) The world’s first stock exchange. Translated by L. Richards. New York, NY: Columbia University Press. 

ⁱⁱ The history of NYSE (no date) Nyse.com. Available at: https://www.nyse.com/history-of-nyse (Accessed: February 16, 2025). 

ⁱⁱⁱ Largest stock exchange operators worldwide 2024, by market capitalization (no date) Statista. Available at: https://www.statista.com/statistics/270126/largest-stock-exchange-operators-by-market-capitalization-of-listed-companies/ (Accessed: February 16, 2025). 

^iv Davis, Lance E., Larry Neal, and Eugene White. “The Highest Price Ever: The Great NYSE Seat Sale of 1928-1929 and Capacity Constraints.” The Journal of Economic History. 67, no. 3 (2007): 705–39. http://www.jstor.org/stable/4501185. 

^v Galbraith, J.K. (2021) The great crash 1929. London, England: Penguin Classics. 

^{vi Metych and Michele (2025) “Black Thursday,” Encyclopedia Britannia}  

^{vii Dow Jones: monthly value 1920-1955 (no date) Statista. Available at: https://www.statista.com/statistics/1249670/monthly-change-value-dow-jones-depression/ (Accessed: February 16, 2025).} 

^{viii Richardson, by G. (no date) Stock market crash of 1929, Federalreservehistory.org. Available at: https://www.federalreservehistory.org/essays/stock-market-crash-of-1929 (Accessed: February 16, 2025).} 

^{ix Jermann, Urban J. and Quadrini, Vincenzo. Stock Market Boom and the Productivity Gains of the 1990s. NBER Working Paper No. w9034. June 2002. Available at SSRN:} https://ssrn.com/abstract=317619 

^x Dotcom bubble (no date) Corporate Finance Institute. Available at: https://corporatefinanceinstitute.com/resources/career-map/sell-side/capital-markets/dotcom-bubble/ (Accessed: February 16, 2025) 

^xi Wall St. ends record year – Dec. 31, 1999 (no date) Cnn.com. Available at: https://money.cnn.com/1999/12/31/markets/markets_newyork/?utm_source=chatgpt.com (Accessed: February 16, 2025) 

^xii Davis, Lance E., Larry Neal, and Eugene White. “The Highest Price Ever: The Great NYSE Seat Sale of 1928-1929 and Capacity Constraints.” The Journal of Economic History. 67, no. 3 (2007): 705–39. http://www.jstor.org/stable/4501185. 

^xiii Jermann, Urban J. and Quadrini, Vincenzo. Stock Market Boom and the Productivity Gains of the 1990s. NBER Working Paper No. w9034. June 2002. Available at SSRN: https://ssrn.com/abstract=317619. 

^xiv Gáspár-Szilágyi S, Pearson A. Facebook with money: the rise of online brokerage platforms and vulnerable groups. Legal Studies. 2022;42(3):377-395. doi:10.1017/lst.2021.51 

^xv Bakos Y, Lucas HC Jr., Oh W, Simon G, Viswanathan S, Weber B. The impact of e-commerce on competition in the retail brokerage industry. International Journal of Electronic Commerce. 2000;4(4):39-56. 

^xvi Philippon T. The financial crisis and the restructuring of the financial sector. RSF: The Russell Sage Foundation Journal of the Social Sciences. 2017;3(1):20-41. doi:10.7758/RSF.2017.3.1.02. 

^xvii Patterson, J. Charles Schwab, TD Ameritrade eliminate trading fees as Robinhood leads the charge. Money and Markets. 2019. Available at: https://moneyandmarkets.com/charles-schwab-td-ameritrade-trading-fees. 

^xviii Trading Herald. The impact of digital innovations on traditional stock trading. Available at: https://tradingherald.com/the-impact-of-digital-innovations-on-traditional-stock-trading. 

^xix The Future List. The rise of robo-advisors disrupting traditional investment management. Available at: https://www.thefuturelist.com/the-rise-of-robo-advisors-disrupting-traditional-investment-management.