Stifel CEO Defends Recruiting As Slump Extends to Second Quarter
Stifel Financial’s recruiting slowdown extended into the second quarter as brokers were slow in returning to offices and the competition from larger firms offering high-end bonuses picked up, Chairman and Chief Executive Ronald Kruszewski said on Wednesday.
“The gross number of recruits is down compared to last year, as the return of advisors to their offices has slowed recruiting,” Kruszewski said on the St. Louis company’s earnings call, echoing comments he made following first quarter results. “In addition, there is increased competition from larger firms offering what are, in our opinion, very high transition packages.”
Stifel ended the quarter with 2,282 brokers, up by a net eight brokers from the prior quarter and 50 year-over-year. Despite the lag in hiring, Stifel’s Global Wealth segment, which comprised 55% of the company’s total revenue, posted a 45% jump in earnings to $227 million and record revenue of $638 million, up 26% year-over-year.
Kruszewski did not discuss specific competitors or Stifel’s own recruiting deals but in response to questions from analysts about how it would address the competitive environment signaled “no change” to its strategy.
“The most important thing is not necessarily: are we competing on the money front in the very short term?” Kruszewski said. “The most important thing is: do we have a competitive platform and the right culture? And on that front, I am very pleased with the improvements we have made.”
He encouraged investors and analysts to look beyond the quarterly ups-and-downs and cited its long-term recruiting track record, which he has said has been a key driver of growth in boosting new client assets and revenue from lending.
“Recruiting is somewhat cyclical. You have to look at recruiting over a longer period than just quarter-to-quarter,” Kruszewski said. “We are a strong recruiter, and we have proven that over not just the last few quarters, but the last few decades.”
Kruszewski’s recruiting comments mirrored those of Minneapolis-based competitor Ameriprise Financial Chief Executive James Cracchiolo, who noted on Tuesday that his company’s gross number of new broker hires fell by about half to 42 experienced brokers across its roughly 10,000 employee and independent advisors in another sign that a pandemic shake-up, which had been a boon for hiring over the past year, is subsiding.
Ameriprise has been one of the firms that recruiters said offers some large deals of over 300% of trailing-12 production to high-end employee brokers in recent years.
Another regional competitor, St. Petersburg, Florida-based Raymond James Financial, earlier this year boosted its deals to as much as 240% of trailing-12 production from about half that after citing a slowdown toward the end of last year.
Kruszewski was optimistic that the recruiting hurdles would subside and the situation was “transitory,” he said in reference to the refrain on inflation that has been repeated by Federal Reserve officials.
Hiring would accelerate once brokers returned full time to their offices and were able to prepare for a career change. Many of those who moved last year had been farther along in their moves before the pandemic struck, making it easier to transition them virtually, he said.
“We are a strong recruiter, and we have proven that over not just the last few quarters but the last few decades,” the CEO told an analyst on the call. “We have a number of people in the pipeline but getting through that in this environment has now extended.”
Kruszewski also pointed to Stifel’s revamped independent channel, which it announced in May, as another driver for recruiting. Stifel had 92 brokers in the independent channel at the end of the quarter, virtually flat for the year.
“Our initial feedback is that we have a very competitive offering,” Kruszewski said of the channel. “And we expect to show increased recruiting as this channel picks up.”