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  • Writer's pictureRick Rummage

MSWM Recruiting Pact Exit: Will Other Wirehouses Follow?

Updated: Mar 6, 2020

By Danielle Verbrigghe October 31, 2017  A shorter version of this story was first published yesterday as a breaking news item. Morgan Stanley Wealth Management is abandoning the Protocol for Broker Recruiting at the end of the week, a move that could clear the way for more litigation against advisors leaving the firm. The Protocol, which was originally signed by Smith Barney, Merrill Lynch and UBS in 2004, allows brokers moving from one signatory firm to another to bring certain client information with them without risking legal actions. In a statement yesterday, Morgan Stanley said that the Protocol is no longer sustainable. “Over time, the Protocol has become replete with opportunities for gamesmanship and loopholes,” wrote Morgan Stanley in a statement. “[F]irms have opportunistically joined the Protocol to make a strategic hire and then dropped out; firms have invoked the benefits of the Protocol when hiring while using non-Protocol affiliates to circumvent the Protocol when they lose talent; and firms have unilaterally made exceptions to the scope of the Protocol, undermining the objective of a universal set of rules.”

Morgan Stanley Wealth Management




$2,307,000 Million


$1,003,000 Million


$374,534 Million


Profile updated as of 10/31/2017

Morgan Stanley’s exit from the protocol could mean advisors leaving the firm will be hit with more aggressive litigation. It could also mean that Morgan Stanley itself will face more lawsuits when it recruits advisors from competitors. The move comes as Morgan Stanley has decided to cut back on its recruiting efforts, as reported. And some observers expect that some other big firms, especially those that have also pulled back on recruiting, may follow suit. So far, other brokerages are staying quiet on whether they plan to stick with the Protocol. Spokeswomen for UBS, Wells Fargo Advisors and J.P. Morgan declined to comment on whether their firms would remain signatories to the protocol or withdraw. A spokeswoman for Merrill Lynch didn’t respond to the question. Other firms that committed to cutting back on advisor recruitment are the most likely to follow Morgan Stanley in exiting the protocol, says Rick Rummage, president of The Rummage Group, a career consulting firm targeting financial advisors. “If you’re cutting back on recruiting, then it makes sense you don’t want to make it easy for your existing advisors to leave,” Rummage says. Merrill Lynch and UBS have each pulled back their own advisor recruiting, alongside Morgan Stanley, as previously reported. Wells Fargo Advisors continues full steam ahead, aiming to take advantage of the lull. But Morgan Stanley’s move to leave the protocol could also backfire, by angering the current advisor force and dissuading new advisors from joining, says Rummage. “This is a negative change for all those advisors sitting at Morgan Stanley,” Rummage says. “It’s just another way to keep the inmates in the prison.” In recent years, brokerages, including Morgan Stanley, have already tested the limits of the agreement by pursuing litigation when their brokers exited for competitors. Morgan Stanley’s decision to leave the agreement, especially if other brokerages follow, could ramp up the scale of the litigation. Some firms targeting Morgan Stanley advisors see the wirehouse’s move to leave the protocol as an opportunity. In the near term, the decision could cause some advisors to accelerate plans to make a move, says Shirl Penney, president and CEO of Dynasty Financial Partners, a firm that targets teams breaking away from wirehouses to launch an independent RIA. “In the most immediate term, there are probably some people who were on the fence who are going to move now while they can still leverage protocol,” Penney says. Some advisors at other wirehouses may also hasten plans to leave their firms if they anticipate that their firm may also abandon the protocol. “The thinking is that other firms will follow suit,” Penney says.  “Advisors at other firms, considering the change may come at their firm, may look to move.” But the move could have a chilling effect on some advisors that aren’t prepared to face litigation, especially smaller teams below the $200 million mark, he admits. Morgan Stanley yesterday also announced other steps to appease its current field of advisors. “Exiting the Protocol will allow the Firm to invest more heavily in its world-class advisors and their teams, helping drive additional growth opportunities,” the firm said in a statement. The wirehouse also yesterday announced a new offering for advisors, called as the Achieving Client Excellence (ACE) Program, which it says aims to use to recognize service professionals’ efforts to support firm initiatives. That includes financial compensation for meeting objectives around areas including cash management and digital. It will also feature new professional development and communications programs, according to information from the firm. Morgan Stanley also announced that it had invested in additional technology, including goals-based wealth management tools.

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