A slew of costly legal charges cut profits at Stifel’s Wealth Management division by more than half in the first quarter, the company reported Wednesday.
The firm reported record first-quarter revenue of $850 million, up 8% over the same period last year. But Stifel CEO Ron Kruszewski said during Wednesday’s earnings call that the firm’s “bottom line was impacted by a significant legal charge.”
Legal expenses totaled $180 million for the quarter, according to Wednesday’s earnings report. Last month, a three-member FINRA arbitration panel slapped Stifel with a $133 million penalty over investment recommendations made by one of its brokers involving the use of complicated investments known as structured notes.
The ruling is the second-largest penalty handed down by FINRA in its history, following a $400 million penalty against Credit Suisse in 2009. Kruszewski said during Wednesday’s call that the firm is currently appealing the decision.
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“The claims were brought by a sophisticated family of experienced and aggressive investors who understood the risks involved, participated in the selection of investments, monitored them closely and only complained after incurring losses,” a spokesperson for the firm said in an email in March.
Advisor headcount continues to fall
Stifel’s recruiting efforts weren’t enough to stave off its third straight quarter of a declining financial advisor headcount. The St. Louis-based firm reported a roughly 1% decline in its advisor numbers year over year, down to 2,340 total advisors in the first quarter.
Kruszewski said during Wednesday’s call that “the strong upward trend in markets over the last few years led many advisors to delay transition, hoping to maximize their trailing production for recruiting packages.” But the recent market pullback has prompted more advisors to shift positions, driving recruiting momentum in the industry.
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In the first quarter, Stifel recruited 52 financial advisors, including nine “experienced” advisors, with total trailing 12-month production of just under $12 million.
“We’ve adjusted our approach to remain competitive while staying disciplined on our return on investment,” Kruszewski said. “We’re seeing early success in this initiative, and our second quarter’s off to a strong start as we’ve added seven experienced advisors with trailing 12-month revenues of $14 million and more than $3 billion in client assets.”
Kruszewski said that the firm is focused on recruiting higher-producing advisors moving forward.
Asset revenue rises, but market headwinds threaten future figures
Revenue from asset management totaled $410 million over the first quarter, driven largely by market performance.
“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 the future quarters for 2025,” Kruszewski said during the earnings call.
Total client assets for the firm were up 4% from the same period last year, to $486 billion, while fee-based client assets were up 7% to $190 billion. Both measures were down slightly from the previous quarter, 3% and 2%, respectively.
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“The sequential declines were due to weaker equity markets and modest asset outflows,” Stifel Chief Financial Officer James Marischen said during Wednesday’s call. “While our net new assets growth for the quarter was modestly negative, I will note that asset flows turned positive in March as net new assets for the month were in the low single digits.”
On the call, Kruszewski offered a hopeful, if cautious, forecast for market levels moving forward.
“While the current environment has introduced volatility, we do not believe a recession is likely. In our view, the disruption surrounding tariffs is not the new normal,” he said. “It’s part of a high-stakes policy negotiation strategy by the White House. 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’re cautiously optimistic.”
