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Broker Protocol Benefits FAs, Clients, Firms, Study Says

December 8, 2017

With UBS and Morgan Stanley recently exiting the Broker Protocol, the fate of the accord on advisor departures remains uncertain. And that’s too bad, because the protocol isn’t just good for the individual brokers — it also helps the firms, according to two finance professors cited by InvestmentNews.

When advisors “own” the client relationship they take better care of it, much like any other employee who owns assets, University of Kentucky Professors Chris Clifford and William Gerken said this week at the MarketCounsel Summit, according to the publication.

In a study conducted before Morgan Stanley announced its withdrawal from the protocol, Clifford and Gerken found advisor turnover did rise at firms after they signed on to the protocol, InvestmentNews writes. But they also found that investor complaints declined too, according to the publication. And what’s more surprising is that a bigger commitment to clients also benefits the firms, Gerken insists.

“Protocol makes a better pool,” he said at the conference, according to InvestmentNews. “It gets existing employees to work harder. If the advisory relationship is benefiting the firm, then give them ownership of the relationship.”

In addition, firms thinking of exiting the protocol shouldn’t assume they’re “above average,” and should consider the effect of “labor immobility” on their own recruiting efforts, according to Clifford, InvestmentNews writes.

(iStock Photos)

After Morgan Stanley announced its plan to withdraw from the protocol last month, UBS pulled out four weeks later, but earlier this week Merrill Lynch announced plans to stay on. Wells Fargo Advisors, the only other wirehouse, has so far remained quiet on its intentions.

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