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Stifel's Hiring Push Aims to Thwart DOL Rule Slowdown

By Murray Coleman July 11, 2017

By most accounts, brokerage industry recruiting is down in 2017. And that’s certainly the case for St. Louis-based super regional Stifel.

Like most of its rivals, the broker dealer isn’t making public overall numbers of new recruits. At the same time its recruiting chief, John Pierce, tells FA-IQ that new FAs joining the firm are down by about 15% compared to the same period in 2016.

“In light of this new regulatory environment, we’re being much more guarded now about who we hire in order to protect our balance sheet,” he says. “To be frank, we’ve been telling more teams lately that they’re just not good fits with our culture.”

Stifel isn’t alone. Advisor movement in the first part of this year has been sluggish across most major broker dealer channels, observes Mark Elzweig, an industry recruiter who’s been tracking such activity for more than three decades.

The main culprit, he says, isn’t any slowdown in unwinding of forgivable loan packages and other incentives offered by wirehouses and broker-dealers. Instead, Elzweig points to uncertainty surrounding implementation of the Department of Labor’s rule mandating fiduciary standards for brokers dealing with clients in retirement accounts.

The comp grid hasn’t changed much in 15 years: Payouts start at 25% on the first $12k per month, with anything over paid at 50%.

“It’s been a huge cloud hanging over both advisors considering a move and firms trying to replenish their ranks,” he says.

Based on recent conversations with new candidates, though, Stifel’s Pierce sees a thawing in the market. A watershed development, he says, seems to be last month’s partial implementation of the DOL rule.

Even if it’s scaled back at some point, Pierce believes a “greater sense of stability has been restored” in the U.S. advisor recruiting marketplace. “Heading into the second half of 2017, our pipeline is brimming with potential new recruits,” he says.

Among advisors managing $100 million or more, Pierce counts 11 new advisory teams joining the firm so far in 2017. Although representing a double-digit percentage drop-off from last year’s pace, he notes Stifel’s average first-half recruit is managing $242 million – about 20% higher than a year ago.

“The silver lining in this renewed emphasis on examining our process of onboarding advisors,” Pierce says, “is that greater regulatory scrutiny is leading us to working with higher-producing teams.”

Stifel has never been a big recruiting player in terms of raw numbers or bonus incentives, notes recruiter Michael Terrana. But since Pierce was hired last year he sees the former Ameriprise and Merrill Lynch executive bringing a renewed emphasis on Stifel's attracting advisors seeking an alternative to wirehouses and indie RIAs.

“Stifel is a rather sleepy midwestern brokerage that’s really starting to wake up,” Terrana says. “They’re putting more resources into onboarding new recruits and making a greater effort to present a clearer message to the marketplace.”

John Pierce

Competitors like Raymond James, Ameriprise and RBC should keep providing stiff competition in major metropolitan markets, he adds. But in smaller areas Terrana sees Stifel as “primed” to build a bigger presence for itself. “They’ve got a unique story to tell focused around a very advisor-centric culture with less bureaucracy,” he says.

The brokerage’s private-client group now employs more than 2,300 financial advisors in 48 states. Stifel’s recruiting sweet spot, says Pierce, is advisors with $100 million to $500 million under management.

One of the BD’s big selling points against wirehouse recruiters is a relatively straightforward compensation grid that hasn’t undergone any major changes in 15 years.

Payouts start at 25% on the initial $12,000 a month in revenue with anything above that amount paid at 50%, according to Pierce. Stifel also offers advisors producing more than $300,000 a year another 5% in deferred compensation over several years.

Pierce isn’t disclosing specifics about its transition packages, which he says typically involve upfront money in the form of forgivable loans as well as equity stakes in the company.

Based on recent deals he’s tracked, industry recruiter Terrana estimates Stifel is offering new employees upfront bonus packages running around 80% to 100% of trailing 12-month gross revenue. “That’s slightly less than the max packages being offered by major rivals like Raymond James," he says. "But it still gets them into the ballpark.”

For his part, Pierce notes that bonus incentives going forward under the DOL rule will need to be “highly customized” according to each practice’s book of business. “In this environment we’ve designed a flexible enough approach to be able to compete with any of the major players in negotiating individual transition packages,” he says.

As a result, Pierce is expecting a strong jump in recruiting activity by his firm in the second half of 2017.

“Even partial implementation of the DOL rule is enough to give advisors a sense that some stability is returning to the broker dealer marketplace,” he says. “And that’s really starting to open the gates to an enormous amount of pent-up demand by advisors looking to find the right home.”