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Raymond James: Keep the Broker Protocol

November 21, 2017

In light of Morgan Stanley’s decision to exit the Broker Protocol, executives at rival brokerage Raymond James are calling for the industry to stay put, InvestmentNews writes.

Morgan Stanley’s decision to get out of the agreement that lets advisors take some client contact information when switching brokerages was expected to be followed by other firms, as reported.

But Raymond James executives say the protocol, which counts more than 1,500 firms as signees, provides for better advisor-client relationships, according an open letter to the industry cited by InvestmentNews.

“Regardless of firms’ ultimate choices regarding the protocol, Raymond James continues to recognize the primary relationship in our business is between financial advisors and their clients,” Dennis Zank, CEO of Raymond James & Associates, Tash Elwyn, president of Raymond James & Associates Private Client Group, and Scott Curtis, president of Raymond James Financial Services, wrote in the letter cited by the publication.

The executives also urge other firms to continue funding the protocol, currently overseen by the law firm Carlile, Patchen & Murphy and its securities litigation practice, according to InvestmentNews. The publication doesn’t specify how much firms contribute to its administration.

The first signees to the Protocol for Broker Recruiting in 2004 were Merrill Lynch, Smith Barney and UBS PaineWebber, with Morgan Stanley and Wachovia Securities, the predecessor to Wells Fargo Advisors, signing on in 2006, the publication writes.

Several Morgan Stanley advisors have accelerated their exits from the wirehouse following the announcement, but it’s unclear how many were in fact prompted by the company’s exit from the protocol, as reported.

Meanwhile, new research suggests the protocol benefits clients, according to InvestmentNews. After a firm signs on the protocol, customer disputes with the firm are 42% lower than the industry’s baseline rate, according to a report published earlier this month by University of Kentucky finance professors Chris Clifford and William Gerken and cited by InvestmentNews.

“We find strong evidence that advisers take better care of relationships after the firm enters the protocol,” they say in their report, which looked at records of 1.3 million advisors and more than 50,000 firms from 1999 to 2016, according to the publication.

While signing on to the protocol does hasten broker departures, it also boosts “employees’ investment in their human capital,” with advisors getting more licenses and transitioning to a fee-based compensation model, according to the report cited by InvestmentNews. And it’s not all bad news for firms, either. Clifford and Gerken found the number of accounts, as well as assets under management, rise after a firm joins the protocol, the publication reports.

By Alex Padalka
  • To read the InvestmentNews article cited in this story, click here.