TRO shakedown waged by Morgan Stanley and UBS is already unraveling
Well, that didn't last long.
About three months ago, Morgan Stanley and UBS both exited the Broker Protocol. Now, that decision is already starting to unravel.
Initially, outside recruiters like myself interpreted the move as one intended to browbeat advisors. Perhaps both Morgan Stanley and UBS thought the threat of temporary restraining orders could dissuade advisors from jumping ship to rival firms. But in recent weeks, temporary restraining order petitions from both firms were slapped down in court.
In Michigan, an advisor team led by Patrick O'Neil that managed $337 million in AUM went independent with Raymond James. According to press reports, Morgan Stanley was unable to demonstrate any violations of non-solicitation clauses. Richard Bean, a fast-track UBS broker in Charlotte, North Carolina, with $77 million in AUM joined Ameriprise. The court rejected UBS' request for a TRO. In Ohio, the $1 million team of Leo Lauterbach and Jeff Gersheimer left Morgan Stanley for Wells Fargo, apparently without incident. There have also been many similar but not widely reported smooth exits from both Morgan Stanley and UBS since the beginning of the year. While some of these cases are scheduled to be arbitrated by FINRA, it's hard to imagine that advisors who honored non-solicitation clauses will face any adverse consequences.
The commonality in all these cases was that advisors who left without triggering a TRO scrupulously adhered to non-solicitation clauses and joined firms that had proven track records in the hiring of advisors from non-protocol firms.
Morgan Stanley's early TRO success in at least four instances can be attributed to incompetent advisors joining incompetent firms. These advisors bungled their moves through such boneheaded moves as sending themselves emails with client information, printing out client information and neglecting to resign properly. They joined either small RIAs with no experience in onboarding advisors from non-protocol firms, or in one case, a small bank that makes only sporadic wirehouse hires.
For those advisors who wish to exit their suddenly non-protocol firm, the way out is now clear: they must comply with all non-solicitation clauses and join firms that have the track record and resources to properly quarterback their move. Right now, there's an emerging new normal on how to leave a non-protocol wirehouse. Over time, as more advisors take this path, the process will become less of a puzzle and more of a routine. Remember when going independent was shrouded in mystery? Now, it's just another familiar choice.
In a concession to the advisor, he can still respond to client emails and calls, even though he may not initiate contact.
Breakaway uncertainty is forcing the RIA to re-evaluate its growth strategies.
Despite Merrill Lynch’s recent decision to stay in the Broker Protocol, Greg Fleming sees a long struggle ahead.
Morgan Stanley and UBS's exit from the accord spurred a number of advisors to move up their planned career changes.
As more advisors demonstrate how to leave Morgan Stanley and UBS in a TRO-free fashion, then those advisors who want to go independent will have the confidence to make their move. Deals are not as rich in this space, so advisors will need to be especially assured that they can go independent without legal issues.
The popular wisdom these days is that the other wirehouses — no matter what they profess — are perhaps only weeks or months away from withdrawing from the protocol as well. But does it make sense that rival firms will emulate a strategy that is patently failing? While some advisors were initially cowed, the TRO shakedown has convinced many high-end advisors that they need to affiliate with a firm that respects and values them and the practices that they've built. This is putting many formerly content advisors in motion. Rival firms who suddenly find that they no longer have to worry about loosing potential recruits to either Morgan Stanley or UBS aren't about to squander their newfound advantage by adopting similar policies. Some regional and independent firm executives with whom I've spoken are simply astonished at the foolish and self-destructive nature of this approach.
They are more determined than ever to do whatever it takes to hire Morgan Stanley and UBS advisors.
Rather than focusing their efforts on devising game plans to put their advisors on lockdown, can't these firms come up with more positive reasons that their advisors should stay with the home team? Morgan Stanley recently formed a 66-person family office product specialist group to help advisors handle ultrahigh-net-worth accounts. Providing advisors with a resource-rich environment that helps them better serve clients is a better way forward to enable firms to retain and attract advisors.