Firms exiting broker protocol will suffer, reps say

Firms that help reps make change are more attractive, Fidelity survey finds

Mar 21, 2018 @ 5:18 pm

By InvestmentNews

As might be expected, brokers are not especially keen on securities firms leaving the broker protocol, but a new survey from Fidelity finds that firms opting out of the protocol are not likely to prevent reps from leaving.

Of the 455 advisers who competed the survey, just three in 10 advisers felt that a firm's exit from the protocol would keep advisers from moving to another firm in the long run. In fact, more than half of those surveyed said that firms staying in the protocol will become more attractive to brokers looking to make a change.

Since making a change now can be more complex, 38% of those surveyed whose firms have opted out of the protocol said they are vetting firms that will help protect them through the move.

"These departures could have a big impact on recruiting," said David Canter, head of the RIA segment at Fidelity Clearing and Custody Solutions. "Advisers who are switching from brokerages that recently left the protocol have unique needs. Firms should think about what they can do to support those advisers — whether it be alleviating concerns around legal costs or helping to establish clients at the new firm."

Of the brokers who were affected by their firm's departure from the protocol and are thinking about making a change, 30% said they expect a lower recruitment bonus to offset any legal costs that may be incurred by the new firm, and 44% said the change would affect their ability to bring their clients with them to their new firm.

Among surveyed brokers whose firms remain in the protocol, the majority (63%) said they are only slightly concerned or are unconcerned that their firm will leave the protocol.

(More: Broker protocol: Indecision over recruiting agreement is rampant)

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