Stifel Raises Monthly Pay Hurdle by 20%
Stifel Nicolaus told brokers on Thursday that they will have to produce 20% more in monthly fees and commissions in 2017 than they do this year to qualify for the top rung of its two-level payout system.
The change means that the 2,300 brokers at Stifel Financial’s principal retail brokerage unit will get a flat 25% payout on the first $12,000 they generate each month and 50% on all revenue above that. For the last six years, the 50% payout took effect at the $10,000 revenue level.
While several brokers said they are disturbed by the change that nominally drops $1.2 million to Stifel’s bottom line every month ($2,000 times .25 times 2,300 advisors) and reduces their monthly cut by $500, firm officials said the St. Louis-based company has been more conservative than most of its competitors in raising its production bar.
“The firm has not changed compensation in six years, which goes against the industry norm of changing it every single year,” said recruiting head John Pierce.
The monthly payout hurdle rise is more stark because most retail brokerage firms have multi-tiered cumulative revenue breakpoints generating the potential for small payout jumps throughout the year. Wells Fargo Advisors, the rare large firm that also has a two-tier monthly system is keeping its monthly hurdle unchanged in 2017, as it has for the past three years.
Morgan Stanley, the largest brokerage firm as measured by its almost 16,000 brokers, is raising the 16 breakpoint hurdles in its more conventional grid structure next year by 10% and its minimum ticket charge by 25%.
Unlike many other firms, Stifel does not does not have minimum household asset requirement that restricts how much brokers can earn and is maintaining the minimum trading ticket charge required for payout at a low $40, Pierce said.
Stifel last changed its monthly revenue hurdle in 2010, when it rose to $10,000 from $8,000 before the 50% payout level took effect.
Two sources said that Stifel in 2018 plans to raise the minimum annual revenue brokers must produce to qualify for the two-tier payout system to $225,000 from $175,000. Those who fail to hit the minimum will be paid at a “penalty box” rate below 25%.
Stifel’s compensation cut comes as its expenses are rising. The publicly traded company reported a 5.5% jump in its brokerage unit’s compensation and benefits in the third quarter to $215 million. Compensation accounted for around 55.2% of the wealth unit’s revenue, according to the company’s third-quarter earnings report.
Stifel Chief Executive Ron Kruszewski has been aggressively growing the firm’s retail brokerage and investment banking units. His 2015 purchase of Barclays PLC’s U.S. brokerage business and of Sterne Agee Financial Services significantly elevated expenses, but has not ended his hunger. The company is currently awaiting final approval to buy Indianapolis-based City Securities, the biggest underwriter of Indiana municipal bonds.