Advisers on the Move

After firms dump protocol, advisers show reluctance to make a move

Observers say there's fear of potential lawsuits that quash contact with clients when a broker or adviser seeks a new employer

Jun 5, 2018 @ 3:06 pm

By Bruce Kelly

Last fall, Morgan Stanley and UBS Wealth Management Americas left an agreement among brokerage firms that allowed brokers and advisers to take a limited amount of client information to a new employer without being sued. Called the Protocol for Broker Recruiting, it was a peace treaty on Wall Street that has been in place since 2004.

The two wirehouses dumping the protocol last year appear to have slowed down financial adviser recruiting during the first three months of 2018. Brokers and advisers are sizing up their options and are particularly fearful of getting hit with potential lawsuits that quash contact with clients when a broker leaves one firm for a new employer, industry recruiters and observers have said.

According to InvestmentNews data, 81 teams of advisers moved to different broker-dealers in the first quarter of the year, compared to 144 during the final three months of 2017. That's a decline of almost 44% of advisers moving to a new employer. (For a same-period comparison, 148 teams moved firms in the first quarter of 2017.)

Two large firms pulling out of the broker protocol may have delayed some advisers from moving to a new firm, but that doesn't mean those advisers are not looking to move to a new employer, said Mark Albers, an industry recruiter who focuses on the wirehouses.

"It's been more like tapping the brakes as opposed to slamming on the brakes," Mr. Albers said. "Some big firms are on the move and there are a lot more in the wings. There's a lot of preparation taking place."

"This was the first full quarter after the departures of Morgan Stanley and UBS from the protocol," said Danny Sarch, an industry recruiter. "Even if an adviser is absolutely miserable at a firm, that's a yellow light of caution to see what happens to advisers when they leave."

"It's the bold adviser who wants to be first to move under new rules," he said. "Changing firms for advisers has always been a long process and it's longer now. Moving to RIAs and independent firms from the wirehouses is continuing, but you can't underestimate how long that takes."

InvestmentNews' data for advisers moving in the first quarter, however, does not include LPL Financial, one of the most active recruiting broker-dealers in the industry. An LPL spokesperson said the company is changing how it reports the hiring of advisers and information was not available. InvestmentNews uses its own reports as well as those of other publications to compile its "Advisers on the Move" list.

LPL saw net gains of 27 and 43 teams of advisers, respectively, during last year's third and fourth quarters. If it had reported similar numbers of teams of advisers joining the firm in the first quarter of 2018, the overall decline would have existed but not been as pronounced.

At least one large firm saw the slowdown in advisers moving during the first quarter of the year. Wells Fargo Advisors reported a decline in recruiting of 15% across its three business channels: traditional wealth management, independent reps and advisers, and banks.

"We are staying in the broker protocol, but also recruit from non-protocol firms," said Heather Hunt-Ruddy, head of client experience and growth at Wells Fargo Advisors.

Meanwhile, Ms. Hunt-Ruddy said adviser attrition at Wells Fargo had declined by about 25% over the first three months of the year.

InvestmentNews reported last month that Wells Fargo Advisors had slowed the bleeding of its financial advisers that began after September 2016. That's when parent company Wells Fargo & Co. revealed a scandal in its retail banking that resulted in the company being fined $185 million for opening accounts for a few million customers without their knowledge — a public relations nightmare that also alienated some of the firm's advisers.

It has been a rough go at Wells Fargo Advisors since then. Over the 18 months from September 2016 to March 31, Wells Fargo saw a 4.5% decline in its adviser workforce, falling from 15,086 in September 2016 to 14,399 at the end of March.

"A lot of work has been done, and no one likes to be in the news," Ms. Hunt-Ruddy said. "It's a challenge and going to remain a challenge, but I hear less about it from recruits."


What do you think?

View comments

Recommended for you

Upcoming Event

Jul 10


Women Adviser Summit

The InvestmentNews Women Adviser Summit, a one-day workshop now held in four cities due to popular demand, is uniquely designed for the sophisticated female adviser who wants to take her personal and professional self to the next level.... Learn more

Featured video


Behind the scenes at Pershing Insite 2018

What goes on behind the scenes at one of the industry's biggest conferences? Join us for an all-access sneak peek!

Latest news & opinion

Mutual funds feel the pinch of platform fees

No-transaction-fee options are a big hit with investors, but funds wind up paying the costs — and passing them on.

Divorce reduces retirement readiness

The new tax law could increase financial challenges for divorced people, but planning opportunities abound.

Merrill Lynch fined $42 million for misleading customers

In addition to the practice of 'masking' trades, the wirehouse went to extremes to cover up the wrongdoing.

Advisers with billions in AUM leaving Wall Street

Merrill Lynch has seen two teams exit recently, each with more than $4 billion in client assets.

Wells Fargo weighs changes to wealth unit

The move would reflect the bank's effort to cut $4 billion in costs.


Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting It'll help us continue to serve you.

Yes, show me how to whitelist

Ad blocker detected. Please whitelist us or give premium a try.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print