DOL fiduciary rule responsible for drop in Stifel adviser headcount: CEO

The firm's CEO said many advisers retired rather than deal with business disruption from the regulation.
JAN 30, 2018

Stifel Financial Corp.'s net loss in financial advisers last year was largely attributable to the Department of Labor fiduciary rule, which caused the firm's advisers to retire in greater-than-usual numbers, a company executive said Tuesday. "I don't think there's any question — a lot of the retirements were in the first half of the year when the DOL rule was being implemented," Ronald Kruszewski, Stifel's chairman and CEO, told InvestmentNews. "The DOL was going to be very draconian to a lot of business models, and some people thought it was a good time to retire." The brokerage saw 36 advisers depart in 2017, ending the year with 2,244 advisers, according to Stifel's fourth-quarter financial results announced Tuesday. That's a 1.6% reduction in total advisers from the prior year. Mr. Kruszewski didn't quantify how adviser retirement factored into these figures, but said he's pleased with the company's recruiting results and prospects as well as adviser productivity. "That's not in my top 50 concerns," he said of the adviser headcount number. The Labor Department issued its fiduciary rule in April 2016. The Obama-era regulation, which raises investment-advice standards in retirement accounts such as 401(k)s and IRAs, was originally scheduled to go into effect April 2017. The Trump administration delayed some parts of the rule from taking effect until last June. Other portions, including the rule's primary enforcement mechanism, have been delayed until July 2019. That enforcement mechanism — a contract stating that investors received advice in their best interests — is the part of the rule most often criticized by the brokerage industry. The contract allows investors to bring class-action lawsuits, and must be entered into when a financial firm receives variable compensation like commissions for advice. Consumer advocates believe the mechanism is an appropriate way to hold advisers and their firms accountable for flawed investment advice. The fiduciary rule has accelerated an industry shift from commission retirement accounts to advisory accounts, which pay advisers a level fee for their services. Stifel's fourth-quarter numbers bear this out — the wealth management segment's revenues from advisory accounts swelled roughly 21% last year, to $702 million. Conversely, commission revenues were down more than 3% on the year, at $475 million. Overall, Stifel's wealth management unit saw income before taxes jump 46% in 2017 to $627 million, according to financial statements. "Broadly speaking, it was a good year. The markets were up. That impacts productivity," Mr. Kruszewski said. Publicly traded broker-dealers like Stifel, LPL Financial Holdings and Ameriprise Financial Inc., saw a big boost in their share prices last year.

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