Stifel Restores Back-End Recruiting Bonuses Following DOL Rule’s Demise

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Stifel, Nicolaus & Company has restored back-end recruiting payments to new brokers who hit asset-transfer targets now that the Department of Labor’s fiduciary rule has been overturned.

The retail brokerage arm of St. Louis-based Stifel Financial will add as much as 25% to 75% to the upfront signing bonuses that brokers can receive under a new plan that the firm has just had approved for those hitting their “onboarding” targets in each of their first five years, said recruiting head John Pierce.

The decision is the latest evidence of brokerage firms’ pouncing on the Fifth Circuit Court of Appeals’ vacating last week of the fiduciary rule to restore the status quo to their sales and hiring practices. The DOL had prohibited tying new brokers’ bonuses to  sales and asset-transfer targets from their former firms, saying such sales incentives could create “acute conflict of interest” for brokers obligated to serve their clients’ best interests ahead of their own.

JPMorgan Chase & Co. two weeks ago reversed its ban on commission-based retirement accounts that it had put into effect to meet the fiduciary rule, and Merrill Lynch told brokers it is conducting a 60-day review that could lead to modifications of its commission ban in those accounts.

Morgan Stanley and Ameriprise Financial had earlier revised some of their recruiting deals to accommodate retirement account revenue that brokers were producing at their former firms.

“Since DOL is in our rearview mirror, we brought back our standard offer,” said Stifel’s Pierce about the revised recruiting package. “And we’ve enhanced it for the right kind of FAs.”

The new deal tacks from 5% to 15% of onboarded gross revenue annually for brokers over five years to their traditional upfront signing bonuses that range from 65% to 150% of trailing-12 production at their previous firms. Brokers at the lowest-qualifying production range of $300,000-$399,000 who hit asset-transfer targets can earn an extra 5% annually for five years, escalating to 7%, 10% and 15% at higher production ranges.

Stifel also has slightly tweaked its up-front awards, which are paid in cash, with a small fillip of company stock. New hires who were producing $750,000 and higher annually at their former firms will receive 120% to 150% of upfront awards—a slight enhancement from Stifel’s previous formula. Those producing $300,000 to $750,000 at their former employer are being offered 65% to 110% of their previous year’s revenue production, somewhat lower than in the firm’s earlier deal, according to Pierce.

The back-end bonuses in the four production ranges that Stifel has set require brokers to hit asset-transfer hurdles of 70% in their first year, 75% in the second, 100% in the third, 125% in the fourth and 150% by the end of the fifth year.

Pierce declined to address how much Stifel is budgeting for recruiting, but said that Chief Executive Ron Kruszewski has reversed the budget-increase freeze that had been in place as a result of the now-defunct DOL fiduciary rule.

The DOL’s kibosh on back-end bonuses and closer scrutiny of conflicts in retirement-account advice contributed to a major decline in recruiting throughout the retail brokerage industry and a failure at many firms to offset attrition of brokers. Stifel as of the end of March had 2,266 brokers, down from 2,299 one year earlier.

“With the DOL, we didn’t want to do anything that would jeopardize the advisor or the firm, so we dramatically slowed down the number of offers we made last year,” Pierce said.