GLOBAL WEALTH MANAGEMENT
We provide securities transaction, brokerage, and investment services to our
clients through the consolidated Stifel branch system. We have made significant
investments in personnel and technology to grow the Private Client Group over
the past ten years.
Consolidated Stifel Branch System
Our financial advisors provide a broad range of investments and services to
our clients, including financial planning services. We offer equity securities;
taxable and tax-exempt fixed income securities, including municipal, corporate,
and government agency securities; preferred stock; and unit investment trusts.
We also offer a broad range of externally managed fee-based products. In addition,
we offer insurance and annuity products and investment company shares through
agreements with numerous third-party distributors. We encourage our financial
advisors to pursue the products and services that best fit their clients’
needs and that they feel most comfortable recommending. Our private clients
may choose from a traditional, commission-based structure or fee-based money
management programs. In most cases, commissions are charged for sales of investment
products to clients based on an established commission schedule. In certain
cases, varying discounts may be given based on relevant client or trade factors
determined by the financial advisor.
Our independent contractors provide the same types of financial products and
services to its private clients as does Stifel. Under their contractual arrangements,
these independent contractors may also provide accounting services, real estate
brokerage, insurance, or other business activities for their own account. Independent
contractors are responsible for all of their direct costs and are paid a larger
percentage of commissions to compensate them for their added expenses. CSA is
an introducing broker-dealer and, as such, clears its transactions through Stifel.
Sterne clears its transactions through Sterne Agee Clearing, Inc., a wholly-owned
subsidiary of our company.
Customer Financing
Client securities transactions are effected on either a cash or margin basis.
When securities are purchased on a margin basis, the customer deposits less
than the full cost of the security in their account. We make a loan to the customer
for the balance of the purchase price. Such loans are collateralized by the
purchased securities. The amounts of the loans are subject to the margin requirements
of Regulation T of the Board of Governors of the Federal Reserve System, Financial
Industry Regulatory Authority, Inc. (“FINRA”) margin requirements,
and our internal policies, which usually are more restrictive than Regulation
T or FINRA requirements. In permitting customers to purchase securities on margin,
we are subject to the risk of a market decline, which could reduce the value
of our collateral below the amount of the customers’ indebtedness.
We offer securities-based lending through Stifel Bank, which allows clients
to borrow money against the value of qualifying securities for any suitable
purpose other than purchasing, trading, or carrying marketable securities or
refinancing margin debt. The loan requirements are subject to Regulation U of
the Board of Governors of the Federal Reserve System (“Regulation U”)
and our internal policies, which are typically more restrictive than Regulation
U. We establish approved lines and advance rates against qualifying securities
and monitor limits daily and, pursuant to such guidelines, require customers
to deposit additional collateral or reduce debt positions, when necessary. Factors
considered in the review of securities-based lending are the amount of the loan,
the degree of concentrated or restricted positions, and the overall evaluation
of the portfolio to ensure proper diversification, or, in the case of concentrated
positions, appropriate liquidity of the underlying collateral or potential hedging
strategies. Underlying collateral for securities-based loans is reviewed with
respect to the liquidity of the proposed collateral positions, valuation of
securities, historic trading range, volatility analysis, and an evaluation of
industry concentrations.
Asset Management
The Asset Management segment includes the operations of ZCM and 1919 Investment
Counsel, and Stifel Trust. Our asset management business offers specialized
investment management solutions for institutions, private clients and investment
advisors. Revenues for this segment are primarily generated by the investment
advisory fees related to asset management services provided for individual and
institutional investment portfolios, along with mutual funds. Investment advisory
fees are earned on assets held in managed or non-discretionary asset-based programs.
These fees are computed based on balances either at the beginning of the quarter,
the end of the quarter, or average daily assets. Consistent with industry practice,
fees from private client investment portfolios are typically based on asset
values at the beginning of the period while institutional fees are typically
based on asset values at the end of the period. Asset balances are impacted
by both the performance of the market and sales and redemptions of client accounts/funds.
Rising markets have historically had a positive impact on investment advisory
fee revenues as existing accounts increase in value, and individuals and institutions
may commit incremental funds in rising markets. No single client accounts for
a material percentage of this segment’s total business.
Stifel Bank
In April 2007, we completed the acquisition of First Service, a St. Louis-based
full-service bank, which now operates as Stifel Bank & Trust and is reported
in the Global Wealth Management segment. Since the closing of the bank acquisition,
we have grown retail and commercial bank assets from $145.6 million on acquisition
date to $7.3 billion at December 31, 2015. Through Stifel Bank, we offer retail
and commercial banking services to private and corporate clients, including
personal loan programs, such as fixed and variable mortgage loans, home equity
lines of credit, personal loans, loans secured by CDs or savings, and securities-based
loans, as well as commercial lending programs, such as small business loans,
commercial real estate loans, lines of credit, credit cards, term loans, and
inventory and receivables financing, in addition to other banking products.
We believe Stifel Bank not only helps us serve our private clients more effectively
by offering them a broader range of services, but also enables us to better
utilize our private client cash balances held on deposit at Stifel Bank, which
is its primary source of funding.
INSTITUTIONAL GROUP
The Institutional Group segment includes research, equity and fixed income institutional
sales and trading, investment banking, public finance, and syndicate.
Research
Our research department publishes research across multiple industry groups and
provides our clients with timely, insightful, and actionable research, aimed
at improving investment performance.
Institutional Sales and Trading
Our equity sales and trading team distributes our proprietary equity research
products and communicates our investment recommendations to our client base
of institutional investors, executes equity trades, sells the securities of
companies for which we act as an underwriter, and makes a market in domestic
securities. In our various sales and trading activities, we take a focused approach
to serving our clients by maintaining inventory to facilitate order flow and
support the investment strategies of our institutional fixed income clients,
as opposed to seeking trading profits through proprietary trading. Located in
various cities in the United States as well as Geneva, Zurich, London, and Madrid,
our equity sales and trading team, service over 2,200 clients globally.
The fixed income institutional sales and trading group is comprised of taxable
and tax-exempt sales departments. Our institutional sales and trading group
executes trades with diversification across municipal, corporate, government
agency, and mortgage-backed securities.
Investment Banking
Our investment banking activities include the provision of financial advisory
services principally with respect to mergers and acquisitions and the execution
of public offerings and private placements of debt and equity securities. The
investment banking group focuses on middle-market companies as well as on larger
companies in targeted industries where we have particular expertise, which include
real estate, financial services, healthcare, aerospace/defense and government
services, telecommunications, transportation, energy, business services, consumer
services, industrial, technology, and education.
Our syndicate department coordinates marketing, distribution, pricing, and stabilization
of our managed equity and debt offerings. In addition, the department coordinates
our underwriting participations and selling group opportunities managed by other
investment banking firms.
Public Finance
Our public finance group acts as an underwriter and dealer in bonds issued by
states, cities, and other political subdivisions and acts as manager or participant
in offerings managed by other firms.
OTHER SEGMENT
The Other segment includes interest income from stock borrow activities, unallocated
interest expense, interest income and gains and losses from investments held,
compensation expense associated with the expensing of restricted stock awards
with no continuing service requirements as a result of acquisitions completed
during 2015, and all unallocated overhead cost associated with the execution
of orders; processing of securities transactions; custody of client securities;
receipt, identification, and delivery of funds and securities; compliance with
regulatory and legal requirements; internal financial accounting and controls;
and general administration and acquisition charges.