- On November 8, 2017
We have heard a lot of industry chatter in the last few days that Merrill Lynch and UBS may follow Morgan Stanley’s lead in exiting Protocol sooner than later, as early as this week.
It wouldn’t surprise us if Merrill Lynch dropped the Protocol bomb on their advisors after rolling out their 2018 compensation plan. Regardless if it is this week, next week, or next month, you can feel it coming, it’s seems inevitable now.
Numerous articles have been posted daily in the financial media since Morgan Stanley announced their exit from protocol. We haven’t found one pundit or expert that has stated anything positive about the provocative power play Morgan Stanley made against their advisors, and we would also against what is best for their clients.
While some wirehouse advisors are going about business as usual, others are concerned with how the break from Protocol will impact their breakaway from a wirehouse in the near future. Other advisors who weren’t considering a move at all, are now concerned about what the wirehouse executives are really telling their advisors by exiting Protocol and what is surely coming next in reduced payouts and perhaps a more modest salary structure. Liberty over litigation.
We know many independent firms are nervous about what this means for their recruiting and independent advocates are bewildered and angry that the success of the independence movement has caused the wirehouses to change the rules, play a technicality, and instead of competing against independent models with their value proposition, to resort to threats and litigation to try to keep their advisors from choosing what is best for them and their clients.
You can achieve Liberty without Litigation
Fear not our wirehouse friends and independent minded brethren. The reason that caused Protocol to be established in the first place was because so many advisors were switching firms. Protocol was created to curb litigation costs and allow for a compliant and civil way for advisors to move firms without litigation if they exercised good faith in following the Protocol rules.
Advisors will continue to move after Protocol like they did before Protocol. The difference today is that social media didn’t exist 13 years ago, a wirehouse brand has lost most of its luster since 2008, and the investor public is much more aware of the values of independence, and want their advisors to act in their best interest. Besides, the courts haven’t weighed in on the matter yet and it is incomprehensible to us that the wirehouses will get everything their way in front of a judge and will lose even more so in the court of public opinion.
Follow the Announcement strategy, don’t take confidential information, and closely follow the advice from your new firm (and your individual counsel) and you’ll be fine. Advisors had the threat of litigation if they didn’t follow Protocol and the same is true now with following the non-solicitation agreement. The threat of litigation will not squash an advisor’s liberty to choose what is best for them and their clients.
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