Stifel Financial Corp., which has increased its brokerage force by 23% in the past year, won't be as buffeted as many analysts expect if regulators impose a fiduciary standard on brokers, the company's chief executive said last week.
“People think it more impacts Stifel, but that's not the case,” CEO Ronald Kruszewski said during a conference call with analysts to discuss the firm's 33.5% jump in second-quarter earnings. “We all have the same programs ... and I think it will be a new fiduciary standard anyway, one that will be a disclosure regime.”
Securities and Exchange Commission Chairman Mary Schapiro has endorsed imposing a fiduciary standard on brokers when they offer advice which would be “harmonized” with the standard that applies to registered investment advisers. In a speech this month, she said that the SEC plans to “craft rules that increase investor confidence while preserving brokers' ability to offer a full spectrum of services.”
Some investment advisers fret that harmonization would dilute the standard, and the brokerage industry has been lobbying hard to ensure that its brokers won't be too constrained by such a fiduciary regime. Brokers currently are subject to a suitability standard that requires products and services to be appropriate, if not optimal, for customers' needs and risk appetites.
Mr. Kruszewski, chairman of the Securities Industry and Financial Markets Association's political action committee, said that he is confident that regulators understand the course that a fiduciary standard must steer between investor protection and industry efficiency.
Increasing investor trust and confidence “will be good for our business,” if regulators get it right, he said.
The Dodd-Frank Wall Street Reform and Consumer Protection Act passed last month gives the SEC latitude to change the standard as well as to eliminate another favorite protection of the brokerage industry: contracts requiring clients to submit disputes to mandatory arbitration rather than litigate them in court. Mr. Kruszewski said one irony of a stricter fiduciary standard is that it could temper some of the negative effects of more litigation. Greater disclosure of conflicts will likely help brokerage firms win motions to dismiss lawsuits, he said.
Stifel added 43 financial advisers and nine retail offices during the second quarter, and added 89 advisers and 15 offices in the first six months this year. It now has 1,940 advisers.
E-mail Jed Horowitz at [email protected].
