Morgan Stanley Protocol Retreat Could Make Upstart RIA Blow Up
A family-owned RIA in Waltham, Mass., sees a significant business opportunity in Morgan Stanley’s recent withdrawal from the Protocol for Broker Recruiting — one that could put it in direct competition with stalwarts in the “breakaway broker” business like HighTower, Focus Financial and Dynasty Financial Partners.
Harvest Group Wealth Management, which manages about $250 million across 1,100 accounts, says it’s been gearing up since its inception about a year ago to help ex-wirehouse brokers make it as independent-RIA advisors by joining their firm.
Though Harvest Group’s offer to employ formerly captive brokers predates Morgan Stanley’s late-October exit from the Protocol — it in fact onboarded its first breakaway advisor just before that event — the departure nonetheless “may lead other brokerage firms to head to the Protocol exit door as well, and that should be a wake-up call for advisors,” according to Todd Ingwersen, Harvest Group’s co-founder and chief investment officer. “Advisors need to prepare, preserve their client base, and take control of their future.”
Whether leaving Morgan Stanley or another large brokerage, Ingwersen — who left UBS Financial with his father Roger Ingwersen and his sister Laurie Ingwersen to start Harvest Group in October 2016 — says breakaway FAs can look to his firm “as a transition team” to help move them and their clients “over as quickly as possible.”
Harvest Group Wealth Management
Speed is important because Morgan Stanley gave less than a week’s notice of its plan to abandon the Protocol, an agreement among some 1,700 brokerages and RIAs (including Harvest Group) that gives advisors ground rules for switching firms without getting into legal trouble. With that example in mind, Ingwersen doesn’t expect too much more notice from other big firms, each one as eager as Morgan Stanley to prevent teams from leaving in an industry that’s seeing more FAs running to the RIA channel than jumping from brokerage to brokerage.
Many experienced wirehouse advisors want out because of micromanagement, according to Ingwersen. “At the wirehouses, you’ve got young people coming in who get some training, study for the exam, and when they pass they’re out there giving financial advice, so the firms need to manage and monitor them pretty closely — and then they need, or think they need, to treat all advisors alike,” he says. “But for a 20-year veteran like me or a 40-year veteran like my father, for an established team like ours, that’s probably not the best environment for running a firm.”
Other sore spots for veteran wirehouse FAs include being barred from using certain investment products and having limited say in what technology they use.
“You’re limited in terms of doing what’s best for clients,” says Ingwersen. “It gets down to what financial planning tool or contact management system you’re allowed to use.”
Harvest Group always planned to grow in part by attracting like-minded FAs with similar backgrounds. “We actually built our office to be three times bigger than we needed for our needs alone,” says Ingwersen. But in Morgan Stanley’s departure from the Protocol — and amid talk of other big players following suit — they see a potential bonanza for this part of their business model.
“We can get a team out the door and in here with us” — and he stresses joiners don’t have to work from the home office — “in literally four days,” says Ingwersen.
This efficiency is the result, says firm patriarch Roger Ingwersen, of a process of “exploring options” to working in the wirehouse world undertaken “several years” before the Harvest Group team made the leap last year. “There are 24 major things you have to do to switch firms under the Protocol and we’ve reduced it to one.”
Or, as the younger Ingwersen puts it: “All new arrivals have to do is fill in the Protocol information, and we do the rest.”
In looking for veteran FAs, Harvest Group is ready to hire younger advisors — especially women — to ensure long-term continuity for clients and a succession plan for advisors. “Boomer assets are controlled by men for the most part now, but it 10 years it’ll be women in charge,” says the younger Ingwersen.
Bottom line, adds Ingwersen, “We want to build a brand by helping advisors do more for their clients. We could take a retirement advisor, for example, and help out on the planning side and on the investment side.”
But advice industry expert and veteran recruiter Ron Edde isn’t sure a can-do attitude is enough to make it as a destination for breakaways in a post-Protocol world.
“Seeing this positive spin applied to the current environment by the Harvest Group is encouraging,” says Edde, who runs Millennium Career Advisors in San Diego. ”But unless they are willing to cross swords — and absorb the potentially significant expense — of legal struggles on behalf of any recruits who hearken to their siren song, I’m not sure encouragement alone is going to be enough to lure a team to try to exit.”