The Fed and the Labor Department — the institutions at the center of two of the most important issues shaping wealth management — drew praise from Stifel CEO Ron Kruszewski.
In comments on an April 24 earnings call with analysts after the St. Louis-based firm disclosed
Kruszewski noted that the rule is likely to face a lawsuit from insurance companies and their trade groups, though.
On a day-to-day basis, many financial advisors and their clients may be wondering more about when the
"The Fed's unprecedented series of rate hikes in 2022 were successful at slowing the inflation that reached 40-year highs," he said. "Yet the market has numerous reasons to justify the Fed to begin a cycle of rate reductions — chief among them a desire to achieve a soft economic landing. While we and everyone, it seems, would like lower rates, the Fed should recognize that reducing rates now is both unnecessary and risky for the economy. We believe that inflation will prove sticky and cutting rates too soon may reignite inflationary pressures, undoing the progress made so far. Simply ensuring that inflation is at or near the Fed's stated target of 2% is more important than trying to ensure a soft landing. The Fed has plenty of great flexibility if the economy slows significantly, and in our opinion should not attempt preemptive rate cuts at the risk of invigorating inflation."
Kruszewski spoke after a mixed quarter for the firm's wealth management unit, which reached new highs in client assets and revenue but sustained a hit to its profits compared to a year ago. The key wealth management takeaways from Stifel's first-quarter earnings statement are below.
And follow these links to see Financial Planning's analysis of the company's last four quarterly disclosures:
Stifel's wealth management unit thrives, even as overall profits tumble As SEC probe weighs on earnings, Stifel reports another record for its wealth unit Stifel's wealth management breaks records even as overall earnings decline Stifel flaunts another record quarter for wealth management
Note: Stifel only breaks out certain metrics specific to the more than 2,300 advisors in its Private Client Group, which is a part of the firm's Global Wealth Management unit. The figures refer to the entire Global Wealth Management division unless otherwise noted.
Recruiting
In the first quarter, Stifel recruited 22 advisors, with 15 of them experienced and generating combined 12-month trailing production of $6.8 million. Of the experienced incoming group, 11 of them went to Stifel Independent Advisors and four moved to the firm's traditional employee channel.
The numbers
Financial advisor headcount
Stifel's headcount ticked up only slightly, with an increase of a net six advisors year over year to 2,356 in total. However, the number of advisors with the firm's independent arm jumped 12% to 114 — despite the February departure of
In response to an analyst's question about the net decline
"I think, when you see markets moving like they have moved, typically advisors take a little time to make the decision to transition," Marischen said. "And I think that's something you're seeing kind of across the industry today."
Client assets
Stock and bond value appreciation and incoming cash assets boosted client holdings. The amount surged 15% year over year to a record $467.7 billion. In terms of fee-based advisory assets managed by advisors in the Private Client Group, the client accounts grew 18% to $155.1 billion. Cash holdings across the entire wealth unit — an area of the business that's fueling major revenue tied to the current high interest rates — climbed 11% to $37.2 billion.
Expenses
Expenses rose with the higher level of client assets. Non-interest costs increased 13% to $499.8 million due to the greater level of compensation on those assets, as well as litigation expenses such as a previously disclosed Securities and Exchange Commission investigation into
Bottom line
Ascending expenses and a lower level of net interest revenue due to shifts in the mix of deposits between Stifel's in-house bank and outside institutions took a bite out of the company's wealth management earnings. The company generated $290.7 million in pretax income on net revenue of $790.5 million for a margin of 36.8%. Profits fell by 8% compared to the year-ago period, and the margin tumbed by 490 basis points. However, net revenue expanded by 4% to a record and the firm's specific asset management revenue soared by 17% to $367.5 million, another new high.
Remark
In his prepared comments, Kruszewski said the company is performing well in challenging economic conditions.
"We're off to a good start, as both revenue and EPS in the first quarter exceeded consensus estimates," he said. "Simply looking at our annualized first-quarter revenue, we are already near the midpoint of our full-year guidance despite market conditions that aren't overly accommodating. The outlook for the remainder of the year is certainly not without risks, as our performance could be negatively impacted by the ongoing geopolitical crises, the uncertainty of the
