Regardless of how the outcome plays out, it is safer and easier for an advisor to move to another firm before Friday. As Morgan Stanley is fully aware, even if you have already received a written offer, it is difficult to move expectantly when you get notice on Monday and would have to move by Friday. So, what happens now?
Morgan Stanley advisors who have already decided to leave Morgan Stanley will have already set start dates or tentative start dates before the end of the year; will escalate their departure and will move this week.
Recruiting teams from competitor firms have been fervently working since Monday afternoon on accelerating start dates, causing transition team scheduling challenges. From our conversations, the general mood is firms are up for the challenge.
Advisorbox, has been in fire drill mode with the handful of Morgan Stanley advisors with scheduled start dates in November that have been moved up to this week.
As for the advisors who have already been exploring their options, doing their due diligence and sitting on the fence after receiving a verbal or even written offer; many will pull the trigger this week.
The employment agreements’, non-solicitation and non-compete clauses will be effective; certainty from Morgan Stanley’s viewpoint.
Morgan Stanley will then attempt to enforce the one-year non-solicitation ban.
Advisors will be warned to follow non-Protocol procedures. Some will, others won’t.
While some advisors will get skittish and wait, more Morgan Stanley Advisors will bolt next week. Some believe that this will not stop their departure, they just couldn’t make it happen this week but would rather be days after the deadline than weeks or months.
The industry will be watching closely how Morgan Stanley responds when advisors leave next week forward. We are taking office bets for the over under, on how many TROs are filed Friday of next week. Other firms, advisors, financial media, recruiting firms and consultants, and about every professional who makes their living in the independent channel, will be watching closely.
“Recruiting FA’s out of Morgan Stanley will see a short pause and then a strong push.”
Firms are already going into their archives to “dust off” their pre-Protocol transition “Announcement” policies and update with social media best announcement practices. Remember that social media didn’t exist pre-Protocol. There wasn’t LinkedIn, Twitter, Instagram, and Facebook launched the same year Protocol did.
Of those advisors who leave, some will operate in good faith (more than Morgan Stanley in our opinion) and not “solicit” their clients but contact them to let them know where they are going, send announcement cards, make social media announcements and won’t print off contact lists or account information. Others, will make a mistake, and Morgan Stanley will argue the advisor acted in bad faith.
Financial media will be at TRO hearings and quickly report the results of the arguments, statements, and the judge’s sentiments and rulings.
The ramifications are enormous and the results of Morgan Stanley actions and the corresponding results of initial litigation from the movements that will occur next week and for the few weeks proceeding, will begin to shape or recalibrate, the strategies advisors and firms will pursue.
There will be an unquantifiable (initially) amount of previously passive and happy Morgan Stanley Advisors that will make a 180 and refuse to work for a firm who philosophically believes the advisor’s clients belong to the wirehouse and not the advisor and legally believes in enforcing such, sending their lawyers to descend upon on departing advisors as a standard policy rather than exception.
Many industry insiders feel Merrill Lynch and UBS are next (we did think it would be Merrill that would be first) and will soon be following Morgan Stanley’s lead and depart from Protocol. We don’t think they will rush it. Why would they? Morgan Stanley has volunteered to be the Guinee pig.
Other firms who have a similar culture and value proposition that promotes an environment where they lose as many, or more advisors than they can attract, will be rooting for Morgan Stanley. They are hoping that judges will mostly rule against advisors and clients on behalf of Morgan Stanley so they can then follow suit. If the results turn out to be unfavorable for Morgan Stanley, then they can just sit tight biding more time as a member of Protocol.
The independent channel especially will be watching and advocating for the best interest of the clients which Protocol has helped to foster. In an increasing sentiment environment for client choice and protection, with notoriety of the DOL rule, and the industry movement, including wirehouse advisors, of transitioning clients over the last decade (plus) from a transactional broker model to mostly fee based, managed money models, can Morgan Stanley turn the tide and stop the momentum? It’s a very different client focused culture today than 13 years ago.
The once meandering stream of freedom in 2004 has become Independence River today. Morgan Stanley can’t stop the flow of breakaways by throwing TRO boulders at it.
Join our list
Subscribe to our mailing list and get interesting stuff and updates to your email inbox.