After seeing a slight dip in advisor headcount last year, Stifel CEO Ron Kruszewski is predicting a recruiting resurgence after two years in which rising markets made it unusually expensive to attract talent from rivals.
Discussing Stifel's annual and fourth-quarter earrings Wednesday, Kruszewski said he has noticed in his nearly three decades at the helm at Stifel that industry recruiting tends to slow in boom times. That's largely because firms try to draw advisors from competitors by offering them transition deals calculated at a multiple of their revenue generation total for the previous 12 months.
And when those trailing 12-month production figures are driven upward by a bull run in the stock market — as has happened in the previous two years — the rising cost of deals can give firms reason to take pause.
"We've seen two years of 20% increases in the markets and fee-based assets increasing," Kruszewski told analysts in an earnings call. "Bottom line is that recruiting, in my experience, generally slows during these times because transition packages are based on trailing 12, and trailing 12 is going up pretty consistently. So that's where it is. But look, as I look forward, I think, if I had to say today, '25 will be a better recruiting year in terms of numbers."
Stifel's headcount dips
Kruszewski's remarks came as his firm reported its advisor headcount had drooped slightly by 2% to 2,342 by the end of 2024. That decrease came despite Stifel's recruitment of 100 advisors last year, including 46 "experienced" wealth managers who produced $37 million in total revenue over the past year. Those included eight advisors added in the fourth quarter, which Kruszewski said was typically a "slow season" for recruiting.
Stifel Chief Financial Officer James Marischen said one boost to the headcount figures will come in the first half of this year when Stifel closes on its planned acquisition of a portion of investment firm B. Riley's wealth management business. Kruszewski said the deal,
Record revenue for 22nd year in a row
The slight decline in headcount made no perciptible mark on the firm's revenue figures for its wealth management division — which shattered an annual record for the 22nd year in a row, Marischen said. The St. Louis-based independent broker-dealer reported that its annual revenue continued its long-standing upward trajectory in 2024, closing the year up 8% at just over $3.28 billion.
"Our long-term success has been the result of our ability to attract and retain highly productive advisors and give them the support they need to most effectively manage their business, to best serve their clients," Marischen said. "Over the past five years, we've added more than 450 experienced advisors, with cumulative trailing 12-month production of more than $350 million or so."
He said 75% of the wealth unit's revenue now comes from asset management fees and net interest income, which he deemed "more recurring sources."
Assets also on the rise
Buoying Stifel's revenues was $501.4 billion in client assets, a figure up nearly 13% from the previous year. Of those assets, $192.7 billion were in fee-generation accounts (up nearly 17%) and nearly $308.7 billion in brokerage accounts used for transactional purposes (up nearly 11%).
Marischen said the asset totals were pushed upward both by bull runs in stocks and other assets, as well as "organic growth" — meaning increases not driven by market conditions. He said Stifel had net asset inflows in "the low single digits" in the fourth quarter.
Higher costs nonetheless squeeze profits
But higher compensation-related and noncompensation expenses meant the gains did not flow to the bottom line. Instead of higher profits, Stifel's wealth management unit reported essentially no year-to-year change in its pre-tax net income, which came in at $1.2 billion in 2024.
Stifel said its compensation-related expenses rose by 13% to $1.6 billion, in part as a result of it having to log more in revenue-related payouts. Wealth managers often give advisors monetary incentives to hit certain income-production goals. Compensation expenses ate up 48.5% of the wealth unit's revenue in 2024, up from 47% the previous year.
Unpredictable, 'episodic' litigation expenses
Stifel meanwhile reported its wealth unit's noncompensation expenses rose by 12% to just over $470 million. Part of the increase stemmed from litigation costs.
Stifel was hit last year with a couple of multimillion dollar penalties over one of its brokers' promotion of allegedly unsuitably complex investment products to clients. Stifel was
A separate panel found Stifel liable for nearly
Marischen said Stifel logged roughly $12 million in legal expenses in its fourth quarter. He said such liabilities are "very episodic."
"It's hard to predict when those types of costs are going to hit our" profit and loss statements, he said. "Over time, they periodically show up."
Stifel's noncompensation expenses were also driven by a need to set aside more money as protection against possibly bad loans. The firm said this "provision for credit loss" was "primarily impacted by loan growth and a deterioration in certain loans, partially offset by a slightly better macroeconomic forecast."
Stiff competition for advisors
Kruszewski characterized the competition for quality advisors as being persistently strong in the wealth management industry. He said Stifel tends to not adjust the size of its transition deals when markets are surging upward. So as long the bull run continues, he said, Stifel will have to remain discriminating about which advisors it tries to pull over.
"We look at almost every recruiting situation as, what is our return on investment?" Kruszewski said. "How does it impact our return on invested capital? So we're very disciplined on that. And in times where people get really competitive, we may lose the marginal deal, because ultimately we don't want to dilute our return on tangible equity by standing at the altar of just having revenue growth."
