Stifel Financial’s leadership is “cautiously optimistic” that its wealth management division will weather recent market volatility. Still, it warned that if equity markets remain depressed, it could drag on asset management revenue and overall results.
“In wealth management our asset management revenues were up 11% versus last year, but this line item is closely tied to market levels, and if equity markets do not rebound, that could have a negative impact on these results in future quarters through 2025 overall,” CEO and Chairman Ron Kruszewski said on an earnings call Wednesday.
The St. Louis-based full-service brokerage and investment bank was generally optimistic about the year ahead despite the market volatility after the Trump administration’s “Liberation Day” tariff announcement on April 2. Stifel was reporting on earnings before that date, through March 31, but kept its 2025 earnings outlook intact.
“In our view, the disruption surrounding tariffs is not the new normal part of a high-stakes policy negotiation strategy by the White House,” Kruszewski said. “Considering the underlying strength of the U.S. economy and efforts to address trade and fiscal imbalances, we remain optimistic about long-term growth. In the near term, while volatility presents challenges, we are cautiously optimistic.”
The CEO added that periods of uncertainty “highlight the value of our advice-centric business model.” Later on the call, he noted that everything could change if the “U.S. economy fell off a cliff,” reiterating that he sees that as unlikely.
There has been widespread speculation that the tariff policies could cause a recession in the U.S., including by BlackRock CEO Larry Fink during its earnings call earlier this month.
Kruszewski said Stifel’s decision to keep its earnings guidance intact did not ignore recent headwinds but reflected expectations of long-term strength.
“If it turns out that we take tariffs on China to 250% and do some other things that have been talked about, then we will revisit it,” he said. “But right now, as we sit here today, I am comfortable with what we have said, and I believe that from here, market conditions will improve.”
On the plus side for Stifel, recent market volatility may be getting advisors who had been considering making a move off the fence, according to Kruszewski.
“The strong upward trend in markets over the last few years led many advisors to delay transitions, hoping to maximize their trailing production for recruiting packages,” he said. “The recent market pullback has prompted more advisors to act, and we’ve adjusted our approach to remain competitive while staying disciplined on our return on investment.”
Kruszewski said the firm has added seven advisors with more than $3 billion in client assets in the second quarter.
CFO James Marischen said on the call that the firm added 52 advisors to its platform in the first quarter, including 9 advisors with trailing 12-month production of $12 million. He added that, after closing an acquisition of a portion of B. Riley Financial’s division in April, Stifel had added 36 advisors with about $4 billion of assets under management, which will show up in Q2 results.
Later on the call, Kruszewski said the firm is focused on recruiting advisors that work on “both sides of the balance sheet, not only managing money, but utilizing our bank to provide banking and holistic services.”
He said Stifel is focusing on advisor teams more than individual advisors, realizing that this same group is “being more heavily courted by the RIAs,” to which Stifel is leveraging its pricing advantage.
In its quarterly earnings, Stifel also reported a legal charge of $180 million related to a dispute with FINRA over allegations of negligence, fraud and breach of contract from Stifel’s investments in structured notes.
In March, FINRA arbitrators told Stifel to pay $133 million in penalties to the Jannetti family, who brought the claim. Stifel is appealing the decision, which Kruszewski noted on the call, but said he could not elaborate on due to the active nature of the case.
“We believe that we are appropriately accrued to the recent judgment as well as the remaining outstanding cases,” he said.
Overall, Stifel reported net income of $43.7 million for the quarter, or diluted earnings per share of $0.39, reflecting the negative impact of legal fees representing $1.16. Even without the legal fees, the result was lower than analyst expectations of $1.64 a share, according to SeekingAlpha.com. Stifel reported revenue of $1.26 billion, slightly below expectations of $1.27 billion.
Stifel’s stock price rose slightly after the earnings release, then fell more than 4% by early afternoon to $82.52.
The markets were up overall on news that the White House was considering cutting its tariffs on China.
