Last year Brussels introduced the Investment Services Directive, which further increased the capital burden on private-client stockbrokers. For those brokers owned by big financial institutions, the implications are less bothersome.
Paul Killik, founder of the private-client stockbroker Killik & Co, says small independent brokers now find it harder to grow, and even harder to get off the ground: "How many have started up in the last few years? Very few, it would seem, at a time when the demand for such services has never been higher, or more necessary."
Howard Shore, of the private- client stockbroker Shore Capital, believes a start-up is all but impossible unless the company has a substantial existing client base to provide economies of scale. He says it is not just the capital requirements - at least pounds 500,000 for a start-up - that weigh heavily; these would be only a fraction of the total cost once investment in IT and infrastructure is added in.
Shore Capital has now diversified from its roots in private-client business and operates a profitable corporate finance arm.
The experience in the UK is very different from that in the US, where retail stockbrokers sprout up in every shopping mall and main street. As well as big players such as Merrill Lynch - whose retail coverage of America is legendary - there are countless independent brokers, with offices running from 40 or 50 branches to several hundred.
One reason for this is cultural. Although the US Securities and Exchange Commission is one of the most stringent stock market regulators in the world, its capital requirements are undemanding: the minimum amount needed for a stock-broking start-up is $25,000 (pounds 15,625).
Nor is there the duplication of capital requirements that occurs in the UK. Killik & Co, for example, has to meet the requirements set out by the Securities and Futures Authority even though it uses a separate organisation to sort out all its client monies, back-office affairs and settlement, which is traditionally seen as the area of greatest risk for any broker and its clients.
Killik & Co's back-office function is handled by Pershing, a specialist US firm, which in turn also has to meet the capital adequacy requirements of the SFA. Pershing has also taken out a separate insurance policy which will pay its client up to $5m (pounds 3.2m) on any one trade that goes wrong.
Trevor Jones, chief operating officer of Pershing, agrees that the regulatory framework inhibits entrepreneurial spirit. The freedom to branch out on your own has been curtailed.
Yet the potential decline of the independent broker takes place at a time when more and more people are becoming shareholders. This year alone the demutualisation of building societies and insurance companies is likely to create 17 million new shareholders, adding to the 6 million or so created as a result of the privatisations.
Meanwhile, investment initiatives such as personal equity plans have created a wider share-ownership base among individual savers.
And yet, as Matthew Orr, a managing partner of Killik & Co, asks, why should it be the big banks that are given free rein, with their deep pockets, to exploit this market?
In response to these fears, Ros Wright, general counsel for the SFA, says: "How very odd. It is not what I hear. Our rules are designed to provide clients with the maximum protection while affording as much flexibility and freedom as possible to our members." Many members disagree; whether there is a future for the independent stockbroker remains to be seen.