Stifel CEO Touts Remote Recruiting Success
Stifel Financial Chief Executive Ronald Kruszewski said Wednesday that the company attracted 28 brokers in the second quarter with trailing 12-month production of $23 million, despite adding only one of the advisers in April.
“I was concerned when we started the quarter that we had to cancel the home office visits and that it was going to significantly–and maybe materially–change our recruiting profile,” Kruszewski said on a call with analysts discussing company earnings. “That just isn’t the case.”
The web tools have proved more efficient than conventional recruiting methods and “allows us to touch more people,” Kruszewski said, echoing comments that other corporate executives have made about unexpected business efficiencies the health crisis has revealed.
Revenue in Stifel’s global wealth division—its largest business—fell 13% from this year’s first quarter and 5% from the year-earlier second quarter to $506 million, largely because of lower interest rates and advisory account fees based on beginning-of-quarter assets that were depleted by the March equities crash.
“We entered the quarter knowing this would be a tough comparison sequentially and year-over-year due to lower client asset levels at the end of the quarter,” Kruszewski said.
Quarterly profit in the wealth unit dropped 18.7% to $156 million from $192 million a year ago, reflecting in part a $19 million provision for credit losses in the wealth unit that shaved pretax margin by almost 400 basis points to 30.9%.
Including Stifel’s institutional, trading and investment banking results, net revenue of $895.8 million was up 11.9% from the year-ago quarter, while net income was down less than 1% to $103 million.
Stifel began 2020 with a recruiting hot streak that was cut short in March by the pandemic. It attracted 26 brokers with trailing-12 production of $20 million in the first quarter. The 28 who arrived in the most recent period remains far short of the 46 who joined in the second quarter of 2019.
Kruszewski told analysts that he is confident the firm will return to pre-Covid levels, repeating that more of it may be done at lower cost virtually. “I would expect our recruiting to possibly be higher than when we were high touch,” he said.
Stifel ended the second quarter with 2,232 advisors, including 94 independent contractors, up 2% from a year earlier. Although it has been an active acquirer of smaller firms, including its late 2015 purchase of Barclays Wealth Americas, 85% of advisor force growth has come through “organic recruiting,” the company said.
Stifel’s revenue and profit declines in wealth management in the just-ended quarter tracked similar patterns at Merrill Lynch Wealth Management and UBS Wealth Management USA. Morgan Stanley, which this year shifted to monthly billing on fee-based accounts, was the outlier with 6% year-over-year revenue growth.
Stifel’s shares were up 2.2% to 47.76 in late morning trading on the New York Stock Exchange.