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RIAs Thank UBS and Morgan Stanley for all the New Clients

By Miriam Rozen September 17, 2018

In the wake of Morgan Stanley’s and UBS’s exits from the Protocol for Broker Recruiting, RIAs are welcoming prospects and new clients who express frustrations about having become pawns in books-of-business battles pitting wirehouse advisors against their former employers.

“‘My broker left UBS and they gave me some little advisor,’” a prospective client with more than $10 million in assets told Ross Gerber recently.

A “handful” of prospects with roughly the same-sized portfolios have expressed similar sentiments when approaching his firm, according to Gerber, CEO of Santa Monica, Calif.-based Gerber Kawasaki Wealth and Investment Management, which has more than $840 million in assets under management.

Other financial advisors at independent firms — including Cheryl Holland of Abacus Planning Group in Columbia, S.C. and J. Brent Everett of Talis Advisors in Plano, Texas — also report they have benefited from the fallout since Morgan Stanley and UBS withdrew from the protocol. The agreement, first signed in 2004, affords advisors the right to take certain client information with them if they move firms.

About the same time Morgan Stanley left the protocol in October 2017, a former client of that wirehouse approached Abacus Planning about bringing his assets to them to manage, says RIA founder Holland, whose firm has more than $1 billion under management. After that client signed with her firm, “his experience was so strong and positive compared to what had happened at the wirehouse,” Holland says, that he became an Abacus Planning champion.

Now about a half dozen of his colleagues and friends – each of whom, like him, have between $4 million to $10 million in their portfolios – have left their wirehouse advisors and signed with Abacus Planning. But because Abacus Planning advisors enforce a firm policy that new clients must bring all their assets, other friends and colleagues of Morgan Stanley refugees have opted to stay with their wirehouse brokers for the time being, Holland says.

She has no doubts, though, based on their conversations, that if their current advisors leave their firms, those prospects too will abandon the wirehouse channel for Abacus Planning.

“We are the net beneficiaries,” Holland says about the wirehouses’ exit from the Protocol.

"We do run across prospects that are frustrated with the ’wirehouse wars,’ but that was true even before the more recent protocol games started,” says Everett of Talis Advisors, which has more than $180 million in assets under management.

“I don’t think that most of their clients understand specifically how the protocol impacts them, but we meet with a lot of disgruntled people who felt abandoned by their previous advisor because the advisor left their firm with little to no notice and no forwarding information. For the most part, clients want to work with a particular individual or team. And, truthfully, other than the logo on the statement, most of the people we meet with don’t realize the difference between these larger firms. We have probably talked with a couple dozen wirehouse clients in the last year and we now work with most of them," Everett says.

“It is a windfall for RIAs when advisors leave wirehouses that are no longer protocol members,” says Mark Elzweig, president of the recruiting firm Mark Elzweig Company.

“I think that when a firm withdraws from the protocol and they put the client in the middle of a potential legal action, they are tarnishing their own brand. Clients don’t like that,” Elzweig adds. “Clients basically like their advisors,” he argues, so they object to seeing firms bash those advisors to get their business after they defect.

Mark Elzweig

“The firms are not just tarnishing their own brand but the whole wirehouse industry,” Elzweig says. “The protocol came into existence in the first place” to prevent such client jostling, he adds. Prior to 2004 and the protocol, when brokers bolted, wirehouses would seek temporary restraining orders barring the defectors from soliciting clients, he recalls. Then the trade press would “gleefully” report about the ensuing fights, Elzweig says. The same types of scenarios have unfolded again since Morgan Stanley and UBS left the protocol last year.

“It’s a black eye for the wirehouse industry,” Elzweig says.

Another recruiter, however, discounts the significance of protocol exits.

Bill Willis, president and CEO of the recruiting firm Willis Consulting, says the shockwave of the protocol defections has begun to fade. Financial advisors at Morgan Stanley and UBS no longer remain cowed by the threat of litigation if they leave, Willis says.

Also, whether a wirehouse is a member of the protocol or not, “the client is not going to know the difference,” Willis argues.

Advisors who leave non-protocol wirehouses, particularly in states where the laws disfavor the enforcement of non-solicitation clauses, simply retrieve their clients’ numbers from their cell phones, call them up, inform them of their new location, and get their business without facing any legal threat—"giving the client the choice they deserve,” says Willis.

One advocate for the wirehouses, who asked not to be identified, noted that advisors who have defected from UBS since it withdrew from the protocol were not necessarily among the top tier of their peers. Therefore, it is not surprising, the same person argues, that their clients are seeking a new advisor in the RIA channel, even though UBS “does make an effort to retain” such clients.

Neither Morgan Stanley or UBS chose to comment for this article.