Is the wealth management firm of the future one that has both employee and independent advisors?

A profound example of that: Stifel is reportedly in talks to acquire Sterne Agee. If the deal were to occur, the resulting firm would strongly resemble one of its rivals -- Raymond James Financial.

Stifel, based in St. Louis, has approximately 2,100 advisors. Sterne Agee, based in Birmingham, Ala., has about 700 employee and independent advisors managing approximately $26 billion in total assets.

"I think we have to use that Raymond James model as a proxy for what is happening here," says Alois Pirker, research director at Aite Group. "Stifel has a great opportunity of becoming a runner up to what Raymond James is: Not quite a wirehouse, but bigger than a regional."

St. Petersburg, Fla.-based Raymond James, acquired regional broker-dealer Morgan Keegan three years ago and boosted its number of employee advisors. Raymond James, which has both independent and employee channels, had a total headcount of 6,300 as of Dec. 31.

Stifel has a small independent broker-dealer subsidiary, Century Securities Associates, which is comprised of almost 140 advisors.  Expanding its independent network may enable Stifel to keep pace with growth in that segment of the wealth management industry.  According to data from research firm Cerulli Associates, RIAs and dully registered channels are expected to increase marketshare from 20% of total industry assets in 2013 to 28% in 2018.

Read more: Stifel Said to Be in Talks to Buy Rival Brokerage Sterne Agee


Ronald Kruszewski, president and CEO of Stifel Financial, has been aggressively trying to expand his firm. He told On Wall Street in an interview late last year that his strategy for the firm since taking the helm has been to make Stifel a leader in the advice business.

"That’s our goal, that’s our business plan. We want to provide advice to people and entities that need it. We recognize that advice is delivered through entrepreneurial, talented people," Kruszewski said.

"So I know that we will be successful if we go from 6,000 people today to 12,000, because those additional people will mean that we are serving that many more clients. If we take care of those two objectives — getting people to join our firm and serving clients — then our stock price will take care of itself."

Recruiters say that the two firms appear to be a good fit, but making the deal work will take effort.

"I think it's another good purchase for Stifel," says Bill Willis, president of Willis Consulting. "The big question is, 'Will they put together the right type of package to keep the people.'"

Howard Diamond, managing director at recruiting firm Diamond Consultants, notes that firms like Raymond James and Wells Fargo which offer both channels are attractive when recruiting new advisors, and also for retaining existing employee advisors who may want to move to the independent side of the business.

"It would be a good way to enhance retention," he says. "You can go between channels. It's a great offering. Instead of offering one flavor of ice cream, you're offering two or three."


According to Pirker consolidations like this may be necessary in an increasingly competitive marketplace for wealth management firms – particularly among mid-sized firms that want to scale up their business.

"You either have the appetite to make deals and grow through M&A and build a firm that is scalable and sizable enough to compete in the market, or it's going to get harder and harder," says Pirker.

Like Raymond James, Stifel may have more opportunities to expand its footprint through recruiting or additional acquisitions, Pirker explains. "So it could be one of more deals for Stifel going forward. I could see them do more deals as well."

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