Stifel Financial will acquire Ziegler Wealth Management and enlist its squadron of 57 advisors with $4.8 billion in client assets. The deal, which is expected to close early next year, will add to Stifel’s 2,252 financial advisors and $265 billion in assets under management.
Chicago-based Ziegler tracks its company history back 115 years. So why did the company decide to sell now? With the pressures of regulation and compliance, “it’s difficult to be a full service broker-dealer. It’s somewhat easier to be an RIA,” says Stifel CEO Ron Kruszewski. “To be a full service broker-dealer, I think you need some scale.”
As for who courted whom: “They approached us,” says Kruszewski, who has known Ziegler CEO Tom Paprocki for more than 20 years.
Firms like Ziegler are faced with mounting regulatory costs and a need to keep up with the competition. “If you don’t have the size to shoulder those costs, then you will need to make a decision to sell or hold on as long as you can,” says Alois Pirker, research director at Aite Group’s Wealth Management practice.
The current industry landscape has spurred more firms to join regional broker-dealers or independent networks, as the cost of doing business rises and wirehouses emphasize efficiency over growth.
Regional firms are taking advantage of the opportunity. But buyers are faced with slim pickings these days as the industry continues to consolidate, Kruszewski noted on a recent earnings call. “The environment is not one that necessarily has firms rushing to sell.”
Stifel, which is based in St. Louis, has been one of the more active acquirers in the market. It purchased City Financial last January, a deal that came with 40 advisors and $4 billion in assets.
Larger acquisitions can be perilous. After Stifel inked a deal to buy Barclays’ U.S. wealth management business in 2015, nearly half of the 180 advisors left before the deal was complete. Kruszewski says that these sorts of deals all hinge on retention. “We priced the [Barclays] deal based upon the people who chose to sign our continuation agreement,” he says.
In announcing the Ziegler acquisition, Kruszewski assured investors that all of the advisors who were offered continuation agreements had signed them.
The advantage of larger acquisitions comes down to culture and cost. Firms like Ziegler retain a large number of advisors with a similar process, and “you can do the migration in bulk,” says Pirker.
Kruszewski agrees. “I would rather hire 57 people this way, than 57 one at a time,” he says. “We find this to be much more efficient for clients, advisors and us.”
Stifel did not disclose further details of the Ziegler deal. Kruszewski told investors that the company plans to continue looking for opportunities to acquire as they arise.
-With additional reporting from Andrew Welsch.