Morgan Stanley, which saw its total advisor headcount drop slightly in the third quarter, says it will leave the Protocol for Broker Recruiting as part of its drive to make new investments in its advisors. It had 15,759 financial advisors as of Sept. 30 vs. 15,777 on June 30 and 15,856 a year ago.
"Obviously, there are more 'outs' than 'ins' at Morgan Stanley. That's what's likely behind this policy change," said Mark Elzweig, who heads an executive-search consultancy, in an interview.
Morgan Stanley and the other wirehouse firms agreed to the Broker Protocol in 2004 to facilitate the movement of registered representatives from one firm to another without violating non-solicitation clauses or Securities and Exchange Commission Regulation S-P, which is intended to protect client privacy.
"Advisors who want to leave non-protocol firms [like Morgan Stanley] need to be indemnified by their prospective employers," Elzweig explained.
Though that's not an issue for large producers joining other wirehouses or regional firms, it will be a problem for smaller producers, who may find that rival firms won't want the expense of settling a potential lawsuit and will step away from hiring them, he says.
Plus, Morgan Stanley's decision to leave the protocol will likely make it harder for its advisors to go independent.
