“We are programmed to receive. You can check out any time you like, but your clients can never leave!”
~ Hotel California, Eagles
The dubious future cast by Morgan Stanley’s Protocol exit and the consequences and ramifications about to be played out, is going to be an intriguing process.
The top issue that we are most anxious to see what happens is the way the court will perceive advisors who joined (whom have some level of security) Morgan Stanley using Protocol, knowing (and have some level of security) that they were moving to another Protocol firm.
When they joined Morgan Stanley they knew that if Morgan Stanley didn’t deliver the value proposition and culture they promised, the advisor, in good faith, could follow Protocol again as he or she did when joining Morgan Stanley to leave Morgan Stanley.
Will a court look at this as imposing employment sanctions after the fact?
Yes, technically the employer would own the client not the employee, but, and a big butt, in this industry it’s different, and with Protocol the advisor knew that while technically his clients become Morgan Stanley’s while they are there, and the existence of Protocol and membership, showed the advisor that Morgan Stanley believed in a peaceful transition as long as the advisor showed good faith and didn’t break Protocol.
Every overgeneralized “reason” Morgan Stanley stated they were being taken advantage of, excuse me, that there was the opportunity for firms to take advantage, pales in comparison to the reality (not just an opportunity) to what Morgan Stanley is doing to them.
There have been rumors and speculation of future wirehouse Protocol departures hovering for years. For you Morgan Stanley advisors, did you or the manager ever bring this up in your recruiting conversations?
If so, did the manager laugh it off and tell you that Morgan Stanley wouldn’t leave Protocol because they would always be recruiting? Or, did they tell you that it was likely and they will be keeping your clients after you join, and oh, thank you very much.
I just don’t see how Morgan Stanley is going to come out on top with this one.
With a situation where the advisor used Protocol to join Morgan Stanley, fulfilled a 9-year recruiting note, and be given a 4 day notice that if he or she doesn’t leave within 4-day the advisor’s clients then will become Morgan Stanley’s clients?
Morgan Stanley’s Protocol membership was of course a big reason the advisor joined Morgan Stanley. There is no way the advisor would have gone to a wirehouse non-Protocol firm. Period.
Just like now, there won’t be many advisors joining Morgan Stanley, not without an exclusion list of his or her clients that would be an exception to the non-solicitation agreement, and even then, why?
I know I am not World Wise like Morgan Stanley but I am scratching my head on this one. Will big money lawyers for a Goliath Wall Street Investment Bank really be able to convince a court and judge that while not fair, it was public information that Morgan Stanley could break from Protocol with one week’s notice anytime they wanted to.
These advisors should have an extended period of time. Will a court and judge really just look the other way at a Protocol bait and switch maneuver, and essentially transfer all the clients both technical and now also nuanced ownership (with Protocol) and allow Morgan Stanley to transfer over 15,000 advisor’s clients as the firm’s from exiting Protocol, removing “ownership when you move” privileges from the advisors and now all 15,000+ advisors have a now “active” one-year solicitation agreement Morgan Stanley is now ready to enforce and litigate?
It’s a power grab, it’s a money grab, will this really happen? Less than 5 months ago James Gorman, CEO of Morgan Stanley was boasting to investors at a conference that the expiring Smith Barney forgivable loans will add 150 basis points to Morgan Stanley Wealth Management’s pretax profit margin starting in January 2019.
That equates to around $61 million per quarter based on the division’s first-quarter results (and compares with savings of about $100 million a quarter that Bank of America has estimated it captured as a result of the expiration of its retention loans to Merrill Lynch brokers last year).
“We have 14,000 people sitting in branches doing administrative work” while advisers spend 70% of their time on non-advisory functions, he said. Many of those functions could change if approached digitally,” said Chairman and Chief Executive James Gorman.
Hey Morgan Stanley advisors, add that one to your list of why you have to leave Morgan Stanley for the sake of your clients. Mr. Gorman spilled the beans that at Morgan Stanley, because of their dated technology, Morgan Stanley advisors have to spend 70% of their time on non-advisory functions.
It seems you would have a lot more time with your clients (and a lot more compensation) actually owning and running your own independent practice than you do being an employee at a MS branch office.
Join our list
Subscribe to our mailing list and get interesting stuff and updates to your email inbox.