What We’re Reading About Broker Protocol

Current Events

Most of the sector’s recent press has focused on broker protocol, so we’ve highlighted some of the more salient pieces as a preface to our take on the matter in next week’s post.

UBS Exits Protocol, Creating “New World” for Advisors, Clients

by Janet Levaux

ThinkAdvisor offers differing takes on UBS’s recent decision to leave the Protocol for Broker Recruiting.  Many believe a wave of advisor departures from the wirehouse firms is imminent while some contend that the rule wasn’t sustainable in the first place.

UBS Broker-Protocol Exit Shows Independent Channel is Bleeding Wirehouses of Advisers

by Bruce Kelly

Smaller RIAs and, to a lesser degree, independent broker-dealers, have been taking market share from the big four BDs for the last several years.  UBS and Morgan Stanley have broken protocol to stymy this momentum and retain advisors that were previously given a pass on being sued if they jumped ship to another broker-dealer.

How UBS Exited the Broker Protocol and Why the Aftereffects May Surpass Those of Morgan Stanley’s Earlier Departure

by Brooke Southall

RIABiz predicts that Merrill Lynch will be the next to abandon protocol, leaving Wells Fargo with a big decision to make in the coming weeks.

B/D Advisor Valuations to Compress as the Broker Protocol Unravels

by Michael Kitces

The Nerd’s Eye View blog predicts a complete unraveling of broker protocol in the coming weeks as few incentives remain for Wells and Merrill to stay on board now that Morgan and UBS have left the agreement.  Mr. Kitces also expects the break to compound the decline in broker-dealer valuations as their market will likely be limited to a more captive audience of other brokers on the same platform.  

Breakaway Broker Deals a Drag on M&A Activity in Third Quarter

by Jeff Benjamin

The impact on sector M&A is more unclear though many industry observers foresee a short-term spike in breakaway acquisitions but an overall reduction in deal-making over the long run.

Broker Hiring Pact Hurt by Defections Expected to Survive

by Neil Weinberg and Katherine Chiglinsky

Many analysts believe the protocol will endure for some firms due to the high cost of litigating and the need for guardrails in handling sensitive client data.  Raymond James, for example, has vowed to remain a member if it were “the last firm standing.”       

In summary, there seems to be a general consensus that Merrill (and possibly Wells) will abandon protocol in the coming weeks.  Less certain is the impact on sector deal-making and valuations though it doesn’t seem particularly bullish for either.  Stay tuned to next week’s post for more perspective on how we think this will all shake out for the RIA community.

Mercer Capital’s RIA Valuation Insights Blog

The RIA Valuation Insights Blog presents a weekly update on issues important to the Asset Management Industry. Follow us on Twitter @RIA_Mercer.