The industry’s most pressing issue remains cybersecurity in the wake of the development of frontier agentic artificial intelligence models like Anthropic’s Mythos, according to Stifel CEO Ron Kruszewski.

Kruszewski spoke about his perspective on AI’s opportunities and concerns during the firm’s first-quarter earnings call on Wednesday, while seeking to dispel concerns investors might have about Stifel’s exposure to recent private credit-related crises and the impact AI could have on Stifel’s cash sweep profits.

Kruszewski’s comments follow AI company Anthropic’s announcement that its newest model, Mythos, was capable of spotting long-hidden flaws in software undergirding the world’s most essential financial, governmental and social institutions. 

“As recently as a few weeks ago, I’m not sure any of us really fully understood what Mythos was, possibly even those that created it,” Kruszewski said. “Models this powerful increase capability on both sides of the table, for those defending and for those who would do harm.”

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In the first quarter, Stifel reported net revenue of $1.48 billion, the second best in the firm’s history and an 18% boost from last year’s $1.26 billion. The firm attributed the growth to higher investment banking and asset management revenues, among others. Kruszewski called the growth rate “comparable to the best firms on the Street.”

In total, investment banking revenue, advisory revenue, and asset management revenue increased 44%, 59% and 12% year-over-year, respectively (asset management revenues in particular posted a record quarter), with client assets up 11% to $538.7 billion. 

According to President James Zemlyak, investment banking exceeded analyst expectations by 2%, while transactional revenue came in 1% below expectations but jumped 7% from the prior year. Net interest income came in $3 million below consensus, which he said was driven by “lower corporate or non-bank net interest income.” At the same time, the firm’s recruiting pipeline was “robust,” though activity was “episodic.”

The net revenue included a non-recurring gain from the sale of Stifel Independent Advisors, which closed in February (though the gain was excluded from core results).

Last fall, Stifel agreed to sell its independent advisor business to the wealth, asset and retirement manager Equitable, with Kruszewski saying at the time the channel was “immaterial” to Stifel’s broader wealth and banking business. Equitable added about $9 billion in client assets and over 110 advisors as part of the deal.

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According to Kruszewski, the firm’s Q1 net revenue was “partially offset by interest on a legal judgment,” presumably referring to a Florida federal court judge’s affirmation of a $133 million FINRA arbitration award against Stifel. The case was brought by members of the Jannetti family, who claimed former Stifel broker Chuck Roberts had defrauded them.

Despite the ruling, Stifel recently revealed in a court filing that it would agree to settle the case with the Jannetti family, asking the court to pause the case while the two sides continue working toward a settlement.

In discussing agentic AI’s potential impact on the firm’s advisor base, Kruszewski argued that today’s models were great at “summarizing, organizing” but less skilled at judgment, which he believed would remain the domain of advisors, and that AI would be a “tailwind” to advice.

“I’m not really comfortable thinking that we’re going to serve our clients with some consensus-building mathematical AI, to be honest with you,” he said. “And we can debate whether or not human judgment will matter, but investing in markets is not a finite game. It’s constantly changing.”

Kruszewski also dismissed the potential impact AI could have on the firm’s cash sweeps, in which clients’ excess cash is “swept” to separate investment accounts, which can generate sizable profits. However, AI moving that cash away from sweep accounts could eat into cash sweep profits.

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While Kruszewski acknowledged that “short-term cash” made up about $60 billion of the firm’s AUM, he said only approximately $7 billion was “unsorted.” The typical client has that cash due to life needs or for reinvestment.

“Will some technology come that will help optimize that? I think so, but at what cost? It’s not free,” he said. “I think it’ll happen, but do I lose sleep over that? No.”