Kevin Scanlon, Executive Vice President & Head of Private Wealth Management, Stephens Inc.
In an interview with Invest, Kevin Scanlon, executive vice president and head of the private wealth management business at financial services firm Stephens Inc., discussed the key milestones for his business in the past year, the key trends in the wealth management sphere, as well as the state of investor confidence. “I think investors are confident, yet there’s uncertainty there, and that tells me they need advice,” he said.
What have been the highlights and key milestones for Stephens Wealth Management during the last year?
This has been another productive year for us, a year of growth. In our wealth management business, like most firms, we benefited from good markets. Almost all the indexes were up by double-digits, more than 20% in some cases. I’m proud of our team for positioning our clients to take advantage of the markets and helping them achieve their financial objectives.
Another thing I’m really pleased with is our team is tracking to achieve a 13th record revenue year and 12th record earnings year within the last 14 years. The only year we missed was 2020 (Covid). That reflects the success our team has had in adjusting and adapting to changing environments.
It has been an interesting year, which started with high interest rates. There was the overhang of the election, but now that it’s over we anticipate the impact on the market will be significant. We don’t know exactly what will happen and when, but there will be changes. That said I’m confident our team will continue to adjust and adapt.
What significant trends are emerging in the financial services industry?
Post-Covid, interest rates were so low that clients were not able to achieve any return in fixed income. Clients started to move away from the traditional 60-40 (60% equities – 40% fixed income) portfolio allotment as there was little return available in the fixed income market. That was followed by a significant inflationary period and, to combat it, the Federal Reserve raised interest rates. Consequently, treasuries increased up to 5% and money markets increased up to 5%. Clients saw this opportunity to rebalance their portfolios back into fixed income—some went as far as 50% or more as it provided stability. Some of that has changed again and clients will need to consider rebalancing their portfolios, accordingly.
Another trend we’re seeing is the proliferation of alternative investments. These include private credit, private equity, real estate markets, hedge funds, and natural resources. Clients have an interest in those markets, and particularly higher-net-worth and ultra-high-net-worth clients. Alternative investments can serve as non-correlated assets that are much more growth oriented, although the appropriate alternative and the size of the asset allocation will depend on both prevailing market conditions and the specific client’s needs.
How would you describe investor confidence at the moment?
I’ve spent a lot of time thinking about that question and how it relates to our business. When markets are doing well, such as when the S&P is up more than 20% for an extended period, clients sometimes think they can manage their investments themselves by leveraging simple indexes. When markets are strong that looks tempting, but we should remember what happened in 2020 and 2021—the market was turbulent, unpredictable and created a lot of challenges. We are currently in uncertain times because inflation is not fully in check and there is global uncertainty. We think interest rates will come down, but it’s not as clear when and by how much. The election is over, but it is unclear what will happen with tax legislation. For example, the Tax Cut and Jobs Act that was enacted in 2017 is set to expire in 2025. Should the Act expire, it will affect several things including deductions and the overall income tax rate for the top bracket which, without change, will increase from 37% to 39.6%. That would have an impact on some investors, and we are helping clients position their portfolios for various scenarios.
Then there is the estate tax provision which is also scheduled to expire at the end of 2025. Currently, an individual has roughly $13.6 million in exemptions and couples have approximately $27 million in exemptions. Again, there is no certainty, but should the provision expire, those exemptions could decrease to approximately $7 million for an individual and $14 million for a couple. That’s significant and might be challenging for a do-it-yourself investor.
Overall, I think investors are confident yet uncertain, and that tells me they need advice. Our advisors offer clients strategies for the short and immediate term as well as addressing their clients’ long-term investment objectives. Wealth planning helps us determine these objectives and guides us to recommendations.
What are the main priorities and goals for your business for the next two to three years?
Growth. We want to grow our headcount, our presence, our footprint, and our capabilities. We have a great partnership here between our advisors and our support teams who act as resources for the advisors. I want to grow that area of our business as well.
What is thrilling is a recent groundswell of interest in Wealth Management from recent graduates. Our advisor development program is a key factor in our growth. It is a thorough and comprehensive program, so we are selective of candidates. In 2025 we have more than 500 applications to our summer internship program. We see this program as the springboard for the next generation of Stephens Private Wealth Management.
I especially want to grow our presence in Texas for wealth management. Stephens Investment Banking has a great presence in Texas, and specifically in Dallas. That creates a lot of opportunities for us. In M&A transactions there can be wealth events, and the people affected may need financial advice. I want to ensure our team is ready to support Dallas with excellent client service.
