A recent Wells Fargo Memo raised questions for some of the firm's brokers about the firm's commitment to the Protocol for Broker Recruiting ("Broker Protocol"). The Broker Protocol found itself in the news again earlier this year when major firms UBS and Morgan Stanley both suddenly pulled out of the voluntary agreement that has been embraced by many major and smaller firms since its inception in 2004.
The Broker Protocol was put into place by Citigroup (then Smith Barney), Merrill Lynch to enable more efficient transitions of advisers and their clients between member firms. At its core, the Broker Protocol originated because firms grew tired of suing each other every time a financial adviser left for a competing firm and took their client details and information along with them.
While there is always a question about who is entitled to retain a client's contact information, the Broker Protocol did much toward reducing lawsuits relating to adviser transitions (while subsequently helping financial advisers to feel comfortable at a firm or comfortable leaving when recruited).
The Wells Fargo Memo led some to believe that Wells Fargo would be leaving the Broker Protocol, which, understandably raised some serious concerns among advisers still at the firm.
There are many legal and regulatory compliance considerations that must be taken into account when an adviser transition looms. If member firms continue to depart from the Broker Protocol, a lawsuit from a previous employer may become a more likely event as it was in the past.
Wells Fargo Quick to Allay Fears, but Smart Advisers Should Hedge Their Bets
The departures of large institutions from the Broker Protocol serve to shake the foundation a bit. The long term impact, if any, is not clear. The savvy adviser will take notice of these changes and take all necessary action to protect themselves if a career opportunity at another firm arises so that the way the transition is handled does not increase the risk of legal action.
Transitioning Advisers May Need Legal Assistance
Generally speaking, no one wants to burn bridges with previous employers or spend money on a lawsuit against a former employee, but, with the Broker Protocol up in the air (and even with it firmly in place), having a knowledgeable legal team on your side can make a successful career transition and/or the protection of your business information a more dependable outcome.
Contact us to learn more about considerations for advisers and firms alike when it comes to transitions in the modern era.
Add a comment
- Starting Out: Mergers & Acquisitions – Term Sheets and Due Diligence
- Four P Words to Remember During the Breakaway and Transition Process
- Proactive Risk Mitigation
- How a Popular Index’s Lack of Risk Disclosures Resulted in a Recent $9 Million SEC Fine: Lessons Learned
- The Importance of Having a Successful Succession Plan
- Why Advisors Should Seek Specialized Counsel When Making a Business Transition
- Protecting Your Firm Through Risk Management
- A Financial Advisory Firm’s Simple, but Costly Lesson in the Need for Adequate Fee Disclosure
- Five Investor Protections to Remember When Finalizing FINRA Pre-dispute Arbitration Agreements
- Compliance Steps Fiduciaries Should Take Now to Help Ensure Continued Adherence with the DOL’s New ERISA Exemption
- Transition Services
- Securities and Exchange Commission (SEC)
- Investment Advisers
- Policies and Procedures
- Due Diligence
- Regulatory Examinations
- Social Media Marketing
- California Consumer Privacy Act (CCPA)
- Aging Clients
- Advisers Act
- Virtual Currency
- Dodd-Frank Act
- Ponzi Scheme
- Office of Compliance Inspections and Examinations (OCIE)
- Securities Law
- Broker Protocol
- Form U5
- Private Equity
- Private Funds
- Hedge Funds
- Regulation Best Interest
- Personally Identifiable Information (PII)
- Government Shutdown
- Risk Alert
- Exchange-Traded Funds (ETFs)
- Investment Company Act
- Rule 6c
- Wells Fargo