UBS broker-protocol exit shows independent channel is bleeding wirehouses of advisers

Smaller shops have benefited from the broker protocol at the expense of larger firms like UBS, experts say

Nov 27, 2017 @ 5:10 pm

By Bruce Kelly

UBS Wealth Management America's decision to leave an industry agreement known as the protocol for broker recruiting is a clear indication that the large wirehouse firms are losing more brokers through attrition than they are gaining from recruiting, industry observers said.

UBS on Monday told its almost 7,000 advisers it was leaving the protocol, which was established in 2004 by a handful of large firms and has made it easier for brokers to leave firms. UBS follows the lead of Morgan Stanley, which told its employees at the end of October it would no longer work under the protocol.

Now, there are more than 1,500 members of the protocol, and the smaller shops benefit while larger firms like UBS lose out, attorneys and recruiters said.

ONE-STOP SHOPS

"When Merrill Lynch, Morgan Stanley and UBS were all members of the protocol, they all had thousands of brokers and one year you are going to gain and the next you will lose," said David A. Gehn, an attorney with Ellenoff Grossman & Schole. "But now, a majority of protocol members are one-stop shops that utilize the protocol membership to [help advisers] leave the existing broker-dealer and get a pass on being sued under the non-solicitation agreement."

"There's been an increase in the RIA space, and some of the independent broker-dealers are doing quite well," he said. "That's eating away at the wirehouse market share. It's certainly substantially greater than it used to be."

"By my estimation, this is the fourth year in a row that the wires have lost more advisers than they have brought in," said Danny Sarch, an industry recruiter. "Now fewer than half of those advisers who have departed the wires are going to one of those four firms," he said, meaning Morgan Stanley, UBS, Merrill Lynch and Wells Fargo Advisors.

(More: UBS broker-protocol exit puts firm before clients.)

Others expect other large firms to exit the agreement. "It will be an interesting development to see who is next," said James E. Heavey, a partner Barton LLP. "We haven't heard the last of it."

EMAIL NOTICE

UBS employees were informed of the change Monday morning in an email from Tom Naratil, president of Wealth Management Americas.

"As our operating model is more focused on retaining our existing advisers than recruiting to grow our business, UBS will no longer be subject to the protocol effective Friday, December 1," according to the memo. "Our decision to exit the protocol is consistent with our organic growth strategy and the same belief that's driven all of our recent enhancements — that, while we will always look to selectively attract talent to UBS, you are the industry's best, most productive advisers."

The change in policy at Morgan Stanley had left some of its brokers feeling the firm was turning its back on them, and some UBS advisers may feel the same.

UBS said in 2016 it was pulling back on recruiting and focusing instead on the retention of advisers.

0
Comments

What do you think?

View comments

Recommended for you

B-D Data Center

Use InvestmentNews' B-D Data Center to find exclusive information and intelligence about the independent broker-dealer industry.

Rank Broker-dealers by

Featured video

INTV

How InvestmentNews picks its Women to Watch winners

The process is laborious and exacting, but well worth it. The end result each year is an impressive group of women in the advice industry from whom others can draw inspiration.

Latest news & opinion

Some good news about female recruitment in financial advice

Each of four core advisory positions tracked in InvestmentNews' benchmarking study has seen an uptick in women entrants.

10 ETFs that are up more than 35% this year

Amid the stock market carnage, there are still some funds posting big gains.

10 biggest HSA providers rated

Morningstar rated the largest plan providers as investment and spending vehicles.

Morningstar: DOL fiduciary rule reduces inflows to mutual funds with high loads

With the measure's demise, will the SEC's advice reform sustain the momentum?

6 tax strategies for year-end planning

How to help clients maximize their wealth using specific tax strategies before the end of the year.

X

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 investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

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

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print