As we publish Financial Planning's 25th Annual Independent Broker-Dealer Survey, it's important to keep in mind that things aren't always as they seem. At its core this survey is about looking back, which means we're getting a bit of a fuzzy picture about what is actually happening now. This year's FP50-the 50 largest independent broker-dealers, ranked by total revenues-has some surprising changes, not the least of which is the appearance of Ameriprise Financial Services, on the list for the first time at No. 2. But more than anything else, this year's list is one of survivors-firms that endured the worst of the financial crisis and lived to tell about it. Several companies did not.

In fact, this year's survey is the first to reflect the full dimensions of the financial crisis and its effect on independent broker-dealers. When we published the broker-dealer survey in June 2008, as the country was feeling the early symptoms of the financial crisis, we reported on how little the distress of the greater economy was being reflected in the independent broker-dealer space. Revenues were up, recruiting was robust and the accumulated wealth of baby boomers meant financial advisors were in serious demand. We weren't lying either-it had indeed been a great year for independent broker-dealers and their affiliated advisors, especially when you consider that several household-name wirehouses were reeling or near extinction.

But because the industry was reporting 2007 numbers-generated well before the worst of the crisis had set in-it was impossible for the survey to tell the whole story. This was apparent in last year's survey, when all of the key numbers-like revenues, payouts and recruitment-slumped, reflecting the distress of the greater economy in 2008. It is even more apparent in this year's survey, which covers business results for 2009. The numbers are down almost across the board, with some firms seeing their performance plummet. On the surface, the impressive stock market rally that began last March and the economic rebound (remember "green shoots"?) that began last fall have been of little help to firms' bottom lines. At least not yet.

EAT OR BE EATEN

More than likely, the benefits of the improving economy and securities markets will be reflected in next year's survey. Despite this year's poor numbers, none of the executives we spoke to are panicking. They remain committed to a long-term outlook and continue to invest in the key components of their businesses, such as technology and practice management, confident that they'll reap the dividends once the economic rebound fully blooms. The one word that kept coming up in interviews was "survival." Faced with slower revenue growth and increased expenses from an anticipated regulatory overhaul, many smaller broker-dealers will likely not survive-at least not by themselves. But those firms with scale, solid management teams and strong net capital will continue to thrive.

"I think in 2009, the theme was survival and containment," says Eric Schwartz, CEO and chairman of Cambridge Investment Research, one of the top performers in this year's survey. "You discovered who the stronger firms were and who the weaker firms were. The good market had hidden the weaker firms, but the economic downturn exposed them."

Schwartz notes that firms with debt and those with "unfortunate connections with their parent company" were struggling. The stronger broker-dealers were able to capitalize on the challenges their peers faced by recruiting advisors away from troubled firms. "It's a tale of two cities," Schwartz says. "The vast majority of firms struggled, while the elite firms excelled because of strong recruiting efforts."

Mark Goldwasser, CEO of the New York City-based National Securities, asserts that to continue to thrive, broker-dealers will need revenues of at least $100 million because of increased margin compression. Critical mass will be necessary to survive, especially in a new regulatory environment, and smaller firms will likely find the necessary momentum for growth elusive. "You're either eating or you're being eaten," Goldwasser says.

HAVES AND HAVE-NOTS

If one were looking for the juxtaposition of fortunes referred to by Schwartz, one would not have to look much further than the fates of Goldwasser's National Securities, and GunnAllen Financial, which was shut down by the Financial Industry Regulatory Authority (FINRA) in March. The Tampa-based GunnAllen found itself going from a position of high growth over most of the past decade to near bankruptcy by the end of last year. On March 22, FINRA told the firm it was in a net capital violation and shuttered the business.

Whereas GunnAllen ran out of capital, National Securities had plenty-because its parent, National Holdings, had merged with the Boca Raton-based broker-dealer vFinance in July 2008. The merger was the kind of fortuitous business move that merits Goldwasser's description as a "seminal event." The merger has given National Securities access to a market-making component and a bond company, and has given them a robust corporate finance department. It has essentially allowed the firm to offer many of the same services as a wirehouse.