Whispers are beginning to make their way to our big ears. The exit out of the broker protocol by the likes of UBS, Morgan Stanley and other large firms has been a disaster on several fronts. 

Legal fees have skyrocketed, advisor exits haven’t meaningfully slowed, the reputations of the ‘prexit’ firms have taken a further beating, and recruiting deal are either at or beyond all time highs (see: Wells Fargo).

The broker protocol exit was supposed to be  the catalyst to greatly reduce advisor movement between Wall Street firms and adjust the recruiting loan/bonuses stuck on corporate balance sheets.

While some balance sheets have leveled off (UBS) others are growing. Advisors continue to exit and have found creative ways to communicate with clients and avoid the legal entanglements connected to non-solicit and non-compete language. Mobile apps like WeChat, Telegram, WhatsApp etc allow for ongoing conversations that are simply not searchable and provide legal cover.

Which leads us to conversations we’ve heard are making their way through US wealth management board rooms. Was exiting the broker protocol a mistake? And if they were to implement a ‘Broker Protocol 2.0’, what would it look like? 

It is likely  that those talks have begun. The current environment isn’t working.

Using UBS as an example, instead of exiting the protocol altogether they could have (should have) just slowed recruiting to a crawl and went significantly upmarket. Which is essentially what they’ve done anyway.

It will be interesting what to make of Protocol 2.0. We expect it to take a while to take shape, but there is no doubt it is being discussed.