Following its acquisition of Sterne Agee and on the cusp of closing its deal with Barclays, Stifel said that its wealth management profits rose 5.5% year-over-year in the second quarter.
Pretax profits for Stifel's advisory business rose to $94 million from $89 million for the same period last year. Net revenues rose to $343 million, up nearly 12% from $307 million. The firm attributed the increase in net revenues to a jump in asset management service fees.
Stifel is in the middle of completing its acquisition of Barclays' wealth management unit in a deal originally expected to bring about 180 advisors and $56 billion in assets to the firm. However, over 50 Barclays advisors have defected to other firms and wirehouses since the deal was announced, according to On Wall Street reporting.
FIERCE COMPETITION
During an analyst call, Stifel CEO Ronald Kruszewski said that it was too early to say how the Barclays deal was going to affect the firm's bottom line.
"I fully expect that there is no reason that this transaction won't close in the fourth quarter of this year," Kruszewski said. "My goal is to be able to provide a better model as to the revenue and the contribution at the third quarter earnings call."
Regarding advisor attrition problems, Kruszewski remains optimistic.
"The competition in the space is fierce. Fierce. Our model is such that we are comfortable where we are. There is some risk at the lower end of the range," he said. "I think my comments were that the attrition would be at the higher end of our range, so we would be at the lower end of our revenue range. But even at that lower end, it will still be a wonderful deal from a shareholder perspective."
Nonetheless, advisor count rose 35.4% to 2,823 in the second quarter, reflecting the addition of new advisors from Sterne Agee and other firms.
FIDUCIARY FEARS
Kruszewski also took aim again at the Labor Department's proposed fiduciary rule, saying it currently is a "broadside on non-managed brokerage accounts" that provide a low-cost alternative to investors.
"The rule is voluminous and is going to add significant costs," Kruszewski said. "It will eviscerate the brokerage model that has served investors so well over many years."
On Thursday, Kruszewski is set to participate in a panel at one of the DoL's fiduciary hearings.
"I feel this is so important and I want to participate in the debate," he said.
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