MIAMI BEACH, Fla. -- Call it the Broker Protocol guessing game. Who’s in, who’s out and who’s next?

Recent wirehouse decisions to exit or stay in the protocol have left industry insiders reading the tea leaves to determine the accord’s fate.

The wait may be a long one, said Greg Fleming, former president of Morgan Stanley Wealth Management and Merrill Lynch and now chief executive of Rockefeller Capital Management.

"The protocol dispute is a long-running tug-of-war that could go on for years," Fleming said, addressing advisors at MarketCounsel’s annual conference. "It's all about who controls the client and whether it is the advisor, an intermediary for the firm, or a counsellor for the client."

The protocol’s fate was called into question when Fleming’s old firm, Morgan Stanley, opted to exit the agreement last month. With more than 15,000 advisors, Morgan Stanley’s decision turned industry heads. UBS, which has nearly 7,000 brokers, followed suit last week.

Some industry insiders took solace in Merrill Lynch’s decision this week to remain in the pact. But MarketCounsel CEO Brian Hamburger isn’t one of them.

The Broker Protocol is "unravelling, make no mistake about it," Hamburger said, adding a prediction: "We will continue to see firms exiting, including Merrill Lynch.”

Hamburger’s law firm works with wirehouse breakaways.

Large brokerage firms are increasingly focused on retention and no longer view the protocol as a recruiting tool, MarketCounsel's chief litigation counsel, Sharron Ash explained in an interview.

Industry executives at the conference, including Hamburger and Ash, maintain that breakaway volume won't slow down despite the additional hassles the lack of a protocol could cause wirehouse brokers going independent.

Gregory Fleming will become chief executive of Rockefeller Capital Management, which has nearly $11 billion in AUM. (Bloomberg News)
"The [Broker Protocol] dispute is a long-running tug-of-war that could go on for years," according to Greg Fleming, former president of Morgan Stanley Wealth Management and now chief executive of Rockefeller Capital Management.

"If advisors are not happy where they work, they will make a change," Ash said. "In fact, for many brokers who were thinking of leaving, this tightening of the leash may be last straw. The long-term effect of leaving the protocol may be that it actually pushes folks out the door."

Shirl Penney, president and chief executive of Dynasty Financial Partners, the New York-based platform provider that aggressively recruits wirehouse brokers, agreed.

"Even if a brokerage firm leaves the protocol, it won't deter large-scale teams from leaving," Penney said in an interview. "The long-term economic benefits of going independent are so great that the potential short-term cost of litigation won't be enough to stop them."

Brokerage teams with books under $250 million may not be so willing to deal with legal constraints such as a temporary restraining order that stops them approaching former clients, which could wipe out 20% to 25% of their production, Penney said.

Smaller teams may be more inclined to join an established RIA with the resources to handle a transition than go independent, he speculated. "RIAs who are equipped to handle tuck-ins could be the winners here," Penney said.

Merrill's decision to stay in the protocol – for the time being anyway – gave the agreement a new lease on life, other executives said.

"It extends the runway," Gabe Garcia, managing director of BNY Mellon’s Pershing Advisor Solutions unit, said in an interview. "We've seeing more interest in what options people have available due to all the noise around the protocol."

Nonetheless, brokers remain anxious, said Louis Diamond, recruiter for Diamond Consultants. "They're waiting to see what will happen," Diamond said in an interview. "Getting a temporary restraining order is the biggest fear."