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Why We're Staying in the Broker Protocol

By Crucial Clips     April 4, 2018
The following text is a transcript of a portion of a speaker's presentation made at an industry conference or during an interview. This transcript solely represents the view of the individual who spoke, and not the view of Financial Advisor IQ or any other group.
Source: FA-IQ, Mar. 22, 2018 

RITA RAAGAS DE RAMOS, SPECIAL PROJECTS MANAGER, FA-IQ: Hi, I’m Rita Raagas De Ramos from Financial Advisor IQ and with me today are Chris Cooke and Brian Cooke who are partners and senior institutional consultants at Cooke Financial Group, which is part of the Noyes network.

The Broker Protocol has returned to the spotlight in recent months and that’s largely because of the exits of high profile signatories. I understand that your firm is staying in the protocol. Could you talk a little bit more about why you decided to stay in the protocol?

CHRISTOPHER COOKE, PARTNER AND SENIOR INSTITUTIONAL CONSULTANT, COOKE FINANCIAL GROUP (NOYES): Absolutely. We’ve been on both sides. We’ve been in a large wirehouse environment for many years -- in fact, most of our careers. And we recently purchased an interest and moved our Cooke Financial Group to a smaller independent firm.

The first step in being part of the protocol, I believe, is the acknowledgment that it is the client who makes the determination of who their primary financial advisor is. If the Protocol for many, many years allowed advisors to move from firm to firm, it was sort of an acknowledgment that those advisors and those client relationships went together. When someone drops out of the protocol, they’re indirectly saying that the client relationship is with the firm and that the advisor is an employee of that firm. That’s a significant change in what’s probably been the norm over 20, 25, 30 years.

We believe if you ask the client who is the relationship with, most clients would say “my relationship is with either Chris or Brian or with the Cooke Financial Group.” Rarely would the client say, “My relationship’s with my firm.” And so we believe it’s the client’s interest that the protocol be honored.

BRIAN COOKE, PARTNER AND SENIOR INSTITUTIONAL CONSULTANT, COOKE FINANCIAL GROUP (NOYES): I echo the same thing. It’s all about the client, in our opinion. If you ask them how they chose their financial services firm or who gives them their advice or who their primary financial consultant is, I think many of them, at least in our instance, would say — probably maybe all of them would say — they hired the Cooke Financial Group or they hired Chris or Brian or someone on our team, versus a specific firm.

So we believe in the protocol, we think it’s necessary.

RITA RAAGAS DE RAMOS: Why do you think it’s so difficult? Why do you think this is such a big issue? I mean, as you said, unequivocally, that clients should be able to decide where they would want to go, to the firm or to the advisors. Why can’t there be a simpler way? Not even just a protocol, but why can’t there just be a simpler way to do this?

CHRISTOPHER COOKE: I think the big firms in particular, but really all firms, we’re running a business. And at the heart of a business is we want continuity of those revenues and want those profits to drop to those shareholders. When you’re running a business, you want to make those client relationships as sticky as possible. But here we have a business where there’s some conflict. We deal with conflicts of interest every day. The conflict of interest is the firm would like the client to be very sticky, but in the same breath we say over and over and over — do the right thing for the client.

So I think when we look at what we say and what we do, it’s very critical that we look harder at what we do. Are we in fact saying, let’s do this because it’s best for the client? Or are we in fact doing something because it’s better for the firm? And that question’s going to be asked over and over, I believe, in the near future.

BRIAN COOKE: I think a lot of cases in the independent space, at least in our case, too, we’re an independent group within Noyes, and we own the client. And it’s stated that way. It’s freedom. If we decided to do something different, those clients would go with us. We’re in a fortunate position in the independent space to be able to say that.

RITA RAAGAS DE RAMOS: So far, when I speak to advisors or when I speak to executives of the big brokerage firms, they talk about this issue in terms of the firm and the advisor. But I wanted to find out, what is the actual benefit to the client to have an account with a firm that is still a member of the Protocol?

CHRISTOPHER COOKE: That’s a great question. I’m not certain that there’s any particular benefit from a Protocol firm or a non-protocol firm on a day-in, day-out basis for that client. But I think if the client was to look at a very long-term timeframe — 20, 30, 40 years — things do change. Twenty years ago, perhaps, the wirehouses had better technology than a small independent. But the way technology has changed, there could be times today a small independent has better technology than a wire.

And if I say to the client, "You should be allowed to follow your relationships," then they need the protocol. If I say, on the other hand, "Mr. Client or Mrs. Client, you are going to be trapped in this environment that you’ve been in, which perhaps years ago was the best and perhaps today is second-best, does that seem fair?" And I think the client would answer that doesn’t seem very fair.

So I believe, again, the client on a day-in, day-out basis may see no difference, but over periods of time as their financial advisor or their relationship makes changes, the client should have the freedom to change with them, especially if it’s to obtain a better environment to work in.


CHRISTOPHER COOKE: Thank you for having us.

BRIAN COOKE: Rita, thanks for having us.