Stifel Financial posted records for both clients assets and asset management revenues in the third quarter while also adding nearly 30 advisors.
The St. Louis-based independent broker-dealer reported Wednesday that its client assets under management rose 20% year over year to $496.3 billion in its quarter ending in September. Of those assets, $190.8 billion were in fee-generating accounts, a figure up 26% from the year-ago period.
That helped drive Stifel's asset management revenues up by 15% year over year to a record high of $382.3 million. The wealth management unit also brought in $129.2 million in commission revenue (also up 15%) and $240.8 million in net interest revenue (down nearly 11%).
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Long-term growth driver
For its wealth management division as a whole, Stifel reported net revenues rose 7% year over year to hit $827.1 million in the third quarter. With expenses subtracted from that, its pre-tax net income came to $301.7 million, basically unchanged from the previous year
In an earnings call Wednesday, Stifel CEO Ronald Kruszewski called the firm's Global Wealth Management unit its "long-term growth driver." He said the division is on pace to have its 22nd year of reporting a new record high for net revenue.
"The key to our growth has been both the retention and recruitment of highly productive advisors while providing the products, service and entrepreneurial culture taken together, which drive our advisors' growth and productivity," Kruszewski said.
Optimism about the 'recruiting landscape'
Stifel said it recruited 28 financial advisors in the third quarter. They included 13 advisors whom Stifel deemed "experienced," listing their total revenue production for the previous year at $10.5 million. Stifel said the ratio of its wealth management unit's compensation expenses to its net revenues came to 48.7%, up from 46.8% a year ago.
Even with the headcount gain in the third quarter, Stifel lost 17 advisors net year over year. It ended September with 2,357 advisors, including independent contractors.
Kruszewski said on the earnings call that Stifel is "balancing recruiting with channel retirements."
"What you see is increased productivity per adviser because we retain clients and we're adding more productive advisors," he added.
Kruszewski said he's "probably as optimistic about the recruiting landscape as I've been."
He said there may be a slight slowdown in deals in the fourth quarter.
"But as I look at both the trends and primarily the number of people visiting us, who we're talking to, I feel really good about our continued growth of that business and the addition of high-quality advisors to our platform," he said.
Litigation and other costs
Expenses for Stifel's wealth management unit rose by 12% year over year to $525.4 million in the fourth quarter. The biggest driver of that was compensation expenses, which also increased by 12%.
The firm's non-compensation operating costs also rose in the third quarter, increasing by 16% year over year to $116.9 million. That was driven in part by litigation-related expenses, which Stifel did not explain in its earnings releases or call.
But analysts at JMP Securities led by Devin Ryan said the cost appears to be related to a dispute
Overall firm
For all of its business lines, Stifel reported nearly $1.23 billion in net revenue for the third quarter. That marked a 17% year-over-year increase and the second highest revenue total the firm has ever posted.
The firm said that was "driven by higher investment banking revenues, asset management revenues and transactional revenues, partially offset by lower net interest income." Stifel as a whole had $149.2 million in net income, a figure up 154% year over year.
Kruszewski
