90 advisors, $12B: Tallying the Broker Protocol exodus
Approximately 90 advisors overseeing more than $12.3 billion quit Morgan Stanley and UBS immediately following the two firms' announcements that they were leaving the Broker Protocol.
The scale of the losses has become clearer as the dust settles following the firms' unexpected policy shifts, which spurred a slew of brokers to accelerate planned departures in order to take advantage of protections offered by the protocol.
The moves and AUM figures were confirmed with their new employers or the advisors directly. The exodus also suggests what other firms could face if they decide to leave the 2004 accord, which permits brokers to take basic client contact information when switching employers.
While many of the career changes were evident in the days following protocol announcements by Morgan Stanley and UBS, others have only come to light as brokers have settled in at their new offices and firms have confirmed new hires.
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RBC, for example, said this week that it picked up Mark Santia and Edmund Foster, who oversaw $366 million while at UBS and joined RBC in Minneapolis. They made the move just prior to UBS's departure from the protocol on Dec. 1, according to FINRA BrokerCheck records.
Of the two wirehouses, Morgan Stanley suffered the majority of the losses.
J.P. Morgan Securities was among the biggest winners, picking up more than two dozen brokers managing over $7 billion from both wirehouses.
But the boutique wealth manager wasn't the only beneficiary. Janney Montgomery Scott nabbed seven advisors overseeing about $400 million in combined assets from Morgan Stanley, and two more brokers managing $120 million from UBS. Meanwhile, 10 wirehouse advisors managing about $1.3 billion jumped to RBC Wealth Management.
AUM could not be confirmed for all the moves. For example, spokespeople declined to provide asset figures for 19 advisors who left Morgan Stanley to join rival firms. But if those brokers managed Morgan's reported average client assets per FA of $146 million, then may have collectively overseen as much as $2.7 billion. That would raise the total AUM for all protocol departures to more than $15 billion.
DRAINING THE PIPELINE
Of course, many of the teams making career changes were already planning such moves, according to recruiters as well as some of the advisors themselves.
"There were people who were waiting for January or March and who said 'Oh my gosh, I need to move right now,’” recruiter Jeff Nash says.
The raft of departures has another effect: Advisors who were going to move in the coming months have now already done so and others have been scared off due to the threat of litigation if they attempt to take clients with them to another employer.
"That drains the pipeline," Nash says. "I would expect six months of not seeing any movement out of these firms."
The real test comes in the long run, says Nash, who is CEO of consulting firm Bridgemark Strategies. Will their attrition rates drop as a result of their being out of the Broker Protocol?
Meanwhile, other firms are likely to remain protocol members. Raymond James and Merrill Lynch have said they will stay in. Spokespeople for UBS and Morgan Stanley were not available for immediate comment.
"I think dropping out of the protocol is in some sense a sign of weakness ― that you've lost the ability to retain advisors," says Rob Bartenstein, a former wirehouse manager and now the CEO of San Diego-based Kestra Private Wealth Services.
His firm, formerly known as Washington Wealth Management, has picked up a number of wirehouse advisors, including two brokers who left recently UBS. They managed approximately $70 million.
But whatever happens to the protocol, advisors will still make career changes ― just as they did before the protocol came into existence.
Kestra Private Wealth has 13 offices and expects to open another three in the first half of next year, Bartenstein says.
"The industry will absorb it and we'll figure it what the 'protocol' is for dealing with non-protocol firms," Bartenstein says.