On the surface, it appears that job growth and economic wellness are heavy on the minds of Americans. Yet, these same people are parking huge sums of money at brokerage firms such as Legg Mason (NYSE:LM), which continue to produce record results.
Legg's fiscal fourth-quarter results included a 49% increase in revenue, and an 89% jump in net income. Earnings per share of $1.21 beat analysts' expectations by about $0.06 per share. For fiscal year 2004, Legg saw revenue rise 29% and earnings jump 56% from the previous year.
A quick sprint through Legg's numbers reveals a trend toward significantly higher assets under management and dramatic increase in client net cash flows. This upward activity mirrors many of the major players in the brokerage industry, such as A.G. Edwards (NYSE:AGE), Bear Stearns (NYSE:BSC), Merrill Lynch (NYSE:MER), Morgan Stanley (NYSE:MWD), Lehman Brothers (NYSE:LEH), and Goldman Sachs (NYSE:GS). These companies have also taken advantage of the favorable interest rate environment, as well as a strong investment climate.
Increased assets under management equals a wealth of investment advisory fees, a trend that brokerage companies have raced to take advantage of. The fact is that people are plowing tremendous bundles of money into the financial markets, and mutual funds such as Royce and Brandywine are gaining additional exposure by partnering with companies like Legg Mason.
Investing in the 21st century has become more about direct access than parking your money in an account and letting a faceless person control your financial destiny. Investors are demanding straight answers and the financial market is responding.
The brokerage industry should continue to enjoy a favorable environment for the foreseeable future. By tapping into additional sources of funding, these companies are now moving stride for stride with the investment community.
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Fool contributor Phil Wohl spent more than 12 years on Wall Street and now concentrates his writing on more fictional characters. He has no stake in any firm mentioned above.
