Stifel's wealth management profits were up 6.5% year-over-year, just as the firm's CEO said it would strengthen its presence in the independent channel with its acquisition of rival brokerage Sterne Agee.

However, some analysts cautioned the move could complicate Stifel's operations.

"While we are overall supportive of the deal, we are a bit concerned about the growing complexity at Stifel. The independent dealer channel comes with added compliance burdens, while fixed income expansion increases earnings volatility," according to a research report written by Credit Suisse analysts Christian Bolu and Matt Tate.

During an analyst call, Stifel CEO Ronald Kruzewski said that the $150 million acquisition would positively impact the firm's global wealth management division.

"This investment in the independent advisor business gives Stifel the opportunity to grow this platform. … We think we're going to grow and compete in this channel," he said, one that Stifel has "otherwise ignored."

Other industry observers saw significant upside for Stifel, particularly as the independent space has seen more growth than other channels.

Alois Pirker, research director at Aite Group, says integrating the two firms should be relatively straightforward.

"Having an independent arm is a burden as well as an asset for firms because we have seen advisors gravitating to the independent space in recent years and Raymond James shows nicely that they have both groups under one roof. … When you look at the new combined entity, Stifel has mostly been an employee model and Sterne Agee has an independent model as well," he says.

Pirker added that there will be complexity as well as opportunity.

"You can see that Raymond James is working both channels effectively by giving advisors the choice of how they work with the firm," he says. "It creates appeal for advisors if you can give them a setup that suits them and not force them to take the one model you offer."


Profits and advisor headcount rose steadily during the fourth quarter for Stifel Nicolaus. The firm reported quarterly profits for its global wealth management division went up 6.5% year-over-year, rising to $84 million for the quarter from $79 million in 2013. Net revenues rose to over $310 million, up 6.2% from $293 million the previous year. Expenses rose similarly, up 6.1% to $226 million from $213 million in the year-ago period.

The firm's estimated advisor headcount is 2,100, according to a firm spokesman. The count is up from 1,957 in the previous quarter, and from 1,930 in the year-ago period. Stifel has been aggressively building its advisor base - the firm recruited approximately 120 advisors managing $11.2 billion in assets under management in 2014, according to a firm spokesman. Stifel currently has about $186 billion in total client assets.

The Birmingham, Ala.-based Sterne Agee has approximately 730 independent and employee advisors with more than $20 billion in client assets. The merger, which is expected to close in the second quarter, will bolster Stifel's advisor headcount to approximately 2,800.

The Stifel-Sterne Agee merger is expected to allow the firm to better compete with rivals Ameriprise and Raymond James, as it joins the ranks of firms with both employee and independent advisor channels.

The company as a whole reported profits of $45 million, down 6% from the year-ago quarter.

--With reporting from Andrew Welsch.

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