Registered reps and financial advisers should not be tethered to the firm's they work for, according to Ronald Kruszewski, chairman and CEO of
Stifel Financial Corp.
When firms restrict advisers from potentially moving to a new employer, it's bad for the securities business, including its clients, Mr. Kruszewski said on Monday afternoon during a call with analysts to discuss Stifel's first quarter earnings.
After fielding a question from an analyst about the impact of firms leaving the protocol for broker recruiting last year, Mr. Kruszewski said the change, at first, had a chilling effect on recruiting.
When Morgan Stanley and then
UBS Wealth Management Americas last fall exited the protocol, an industry agreement that makes it easier for brokers and advisers to move to new firms, it upended 14 years of peace among the largest brokerages.
"In the initial coming out of the gate, certainly, there was a chilling [effect] on the recruiting aspects in the firms that have elected to remove themselves from protocol," Mr. Kruszewski said. "But that sort of hits bottom and then it improves, because people are not indentured, they are going to work, they want to work, and the industry will adjust."
"As I said before, I find that leaving protocol is not a good thing for clients, and I have made that argument," he said. "It has put a damper on recruiting, but the trend lines will improve from here. [Advisers] are going to be where they want to be, and clients have a right to choose where they want to do business. I don't believe that you should be using the courts to prevent client choice."
Both
Stifel Nicolaus & Co. and its independent broker dealer, Securities Associates Inc., have been part of the broker protocol for recruiting for almost 10 years.
Stifel
reported 2,266 financial advisers at the end of March, a decrease of 33, or 1.4%, when compared with the same period last year.
A number of Stifel advisers retired last year in the face of the Department of Labor's fiduciary rule, which has since been put on the shelf due to a recent court ruling. The Securities and Exchange Commission last month officially proposed its own investment advice rule.
"While our recruiting efforts have increased over the past year, as concerns regarding the impact of the fiduciary role subsided, we continue to see elevated levels of retirement, negatively impact our adviser headcount totals," Mr. Kruszewski said. "Stifel was able to retain most of the client assets from retirement advisers."
"We would expect the number of retirements to decline in the next few quarters and our recruiting efforts should result in improved adviser growth," he added.
