Stifel Revenue Jumped in Q1 But Virus Depresses Recruiting, Assets
Stifel Financial’s wealth management unit recruited 26 advisors with $20 million in revenue in the first three months of the year, but the fallout from shelter-in-place orders will dampen hiring going forward, chief executive Ron Kruszewski said.
Raymond James Financial similarly warned on Thursday that tele-recruiting cannot compete with “face-to-face” meetings at corporate headquarters, where recruiters and top executives pitch firm culture, technology and transition deals.
“When we get people here our rate of winning is very high,” Kruszewski said.
Like Raymond James, UBS Wealth Management Americas and Merrill Lynch, Stifel recorded record quarterly revenue due to late-quarter transactions from customers shifting from investments to cash and high start-of-quarter portfolio valuations that increased fee revenue.
Revenue at Stfiel rose 14.2% to $582 million from $510 million in the first quarter last year. But expenses were up 23%, leading to a 0.2% dip in earnings to $194 million.
Client assets under management fell 13% to $277 billion, excluding the $9 billion impact of Stifel’s sale of an asset management unit.
If not for the firm’s recent recruiting successes and their account transfer, assets would more likely have declined closer to 20%, Kruszewski told analysts.
About 29% of client assets, or $80.6 billion, were in advisory accounts that wealth management firms prefer because they generate fees regardless of clients’ trading activities. Those accounts fell 12.5% in the quarter from $92.1 billion in the linked quarter. The proportion in asset-based fee accounts at wirehouses Morgan Stanley, Merrill and UBS are higher than 40%.
Stifel clients, like those at competitors, traded actively at quarter’s end as the effects of the volatile coronavirus market set in. Commissions from brokerage account revenue rose 17.4% to $178.9 million from the year-earlier first quarter.
Stifel’s brokerage count as of March 31 was 2,224, up a net 163 from a year earlier. That compares with net additions of 150 advisors in all of 2019. Fewer than 100 of its advisors are independent contractors.
Stifel had not experienced trading issues or outages as a result of the shelter-at-home orders that have 90% of its employees working remotely, according to Kruszewski.
“Our ability to operate in this environment with no systems down and no issues has underscored people’s belief in our firm and in our technology and what we’ve done,” he said without identifying any competitors by name.
Many Merrill Lynch brokers lost access to their workstations intermittently one day last week due to sporadic internet service provider network issues, and Morgan Stanley brokers and customers could not view accounts or enter orders for more than four hours on March 2 as a result of an IBM software problem. (Morgan Stanley has reimbursed clients who were adversely affected by their inability to trade.)
Total net income across Stifel, which operates capital markets and investment banking units in addition to its mainstay retail brokerage business, fell 16.5% to $115 million from the year-earlier quarter. Expenses were heightened due to a reserve for compensation accruals and an increase in its provision for loan losses, the company said.