Three weeks after Morgan Stanley left the Broker Protocol, UBS is following suit, potentially dooming the pact to collapse.

Morgan Stanley's abrupt policy shift appears to have sparked UBS's move, which becomes effective Dec. 1. Executives were not considering leaving the protocol, but felt compelled to adjust to the shifting landscape, according to a person familiar with the matter.

Morgan Stanley is the nation's largest wealth management firm with nearly 16,000 advisors and more than $2.2 trillion in assets. UBS is half that size, with approximately 6,900 advisors, though its brokerage force is the most productive based on revenue generated per advisor, according to earnings reports.

UBS’s departure from the protocol also comes in the wake of its transformation under President Tom Naratil. The wirehouse has tried to position itself as the preferred place for high-net-worth and ultrahigh-net-worth advisors to base their practices. UBS has attempted to shift resources from recruiting efforts to its current brokerage force, and it drastically simplified its compensation plan in 2016 (that plan will remain in place for 2018, a break from traditional wirehouse practice of annually tweaking broker pay).

"Our top priority is helping you reach your full potential, not recruiting advisors from our competitors," Naratil said in a memo sent to employees Monday morning.

PROTOCOL'S FUTURE
As soon as Morgan Stanley announced its exit from the protocol last month, industry insiders have speculated as to whether UBS and Merrill Lynch, which has also cut hiring efforts, would follow suit.

A Merrill Lynch spokeswoman has previously declined to comment on the firm's intentions.

The protocol came into existence when Merrill Lynch, Smith Barney and UBS decided it was in their best interests to create a smoother way for brokers to transition from one firm to another. Under the 2004 agreement, advisors can take certain pieces of client contact information without threat of being sued.

In the ensuing years, the number of protocol signatories has grown to nearly 1,700 firms.

In leaving the pact, Morgan Stanley said other firms were unfairly taking advantage of loopholes in the protocol; joining one day to recruit and leaving the next.

Morgan Stanley, like UBS and Merrill Lynch, has reduced recruiting efforts this year, citing the high cost of hiring bonuses. The wirehouses have also been losing top talent to fast-growing regional brokerages and the breakaway advisor movement. By leaving the protocol, firms could possibly enforce non-solicitation agreements.

Although Raymond James prominently said it would stick with the protocol, many industry observers ― including Stifel's CEO ― have suggested the pact would collapse without the support of the biggest brokerage firms.

"If at the end of the day the wirehouses aren't there, then what's the point of joining as a small firm? You don't get much and you give up that protection of the client base," attorney Dennis Concilla said in an interview earlier this month.

Morgan's announcement that day sparked a raft of departures: Approximately 60 registered reps overseeing more than $9 billion jumped to rival firms that week, according to hiring announcements and FINRA BrokerCheck records.

Will a similar exodus occur at UBS? Perhaps not, says the person familiar with the firm's internal discussions. Any UBS advisor planning to leave already saw Morgan Stanley's protocol decision and has therefore had several weeks to accelerate a career move.

And though UBS has reduced recruiting efforts, it's still continued to hire selectively. Earlier this month, the firm picked up a team managing about $900 million in client assets.

That kind of recruiting will likely continue even if the Broker Protocol unravels. After all, industry insiders say, there was plenty of recruiting pre-2004.