LPL, Stifel Talk Up Recruiting Despite Weak Q4 Arrivals
The largest independent broker-dealer and an aggressive regional firm reported flat to falling headcount numbers for the fourth-quarter, but both LPL Financial and Stifel Financial Corp. said they are enthusiastic about hiring new brokers.
LPL ended 2018 with 16,109 affiliated brokers, a net loss of 65 during the fourth quarter, the company said Thursday evening as it reported an 88% jump in net income of of $120 million from the previous year’s quarter on an 18% rise in revenue.
The paradox of a decline in net brokerage force and a jump in revenue is misleading since the company had a record gross recruiting quarter primarily from other independent firms and had strong retention equal to 95.9% of advisors’ production, LPL Chief Executive Dan Arnold explained on a conference call with analysts. The net outflow reflected the loss of some 50 brokers to Independent Financial Partners—one of LPL’s biggest affiliates that is setting up its own hybrid RIA-brokerage firm, he said, supplemented by the typical end-of-year decision of low producers to turn in their brokerage licenses.
LPL, which added 899 net brokers during the year driven largely by its first quarter addition of National Planning Corp. brokers, said its recruiting drive has tailwinds as a result of brokers’ growing desire to run their own shops and because of its investments in technology.
“We continue to benefit from the movement from an employee-based model to an independent model,” Arnold said of success in recruiting from wirehouses and regionals.
But independent contractors switching firms continues to be the biggest source of hires because they “see LPL as an opportunity to have an access to an enhanced set of capabilities,” he said.
St. Louis-based regional Stifel Financial said in its fourth-quarter earnings release on Friday that it ended 2018 with 2,301 brokers, a net addition of 57 over the year and of three since the end of the third quarter. (The totals include 101 independent contractors, a shrinking Stifel channel branded as Century Securities that lost 11 advisors net in 2018.)
Stifel retreated from recruiting for several years out of concerns that its signing packages with back-end bonuses for hitting production targets could violate the Department of Labor’s fiduciary rule. It resumed its efforts in the wake of last year’s judicial voiding of the DOL rule.
“Our overall sense of recruiting is as positive as I’ve seen it in a long time,” Stifel Chairman and CEO Ron Kruszewski said on an earnings conference call on Friday morning, citing visits by prospects to the home office and late-stage talks.
He declined to discuss specific recruiting targets, deal terms or resultant asset-growth goals but said he is enthusiastic because new advisers “bring client cash, they bring AUM and revenue.”
Stifel reported fourth-quarter earnings of $111.7 million compared to a loss in the year-earlier period on revenue that fell 1.3% to $793.4 million. Net revenue in wealth management, its largest business, rose 7.5% to $509 million, while the unit’s expenses were up 5.3% to $320.3 million.
Separately, Oppenheimer & Co. said Friday that its brokerage force fell last quarter to 1,073, down 24 from the end of 2017. The New York-based firm, which employed almost 1,300 brokers three years ago, said the decline continues its project of culling out lower producing brokers and those with disciplinary issues.
Oppenheimer Holdings reported a 61% drop in fourth-quarter net income to $8.26 million from the year-earlier fourth quarter, citing the “extremely volatile” December stock market when the S&P 500 loss 14% of its value. Like other firms, Oppenheimer said it partly offset the resultant depression in fee and commission income with higher management fees as more assets transferred into advisory accounts and with rising interest income as investors moved into cash accounts.
Oppenheimer earlier announced that Mark Whaley, its private client group head, is stepping down this month from the position. His replacement is Ed Harrington, a long-time Opco executive.