A Few Firms Pull Out Of Broker Recruiting Protocol, But The Real Threat Is More Subtle


Nice piece in Investment News on how a few broker-dealers are pulling out of the protocol, which theoretically prevents them from suing if client accounts follow an advisor from firm to firm.


But if more than 700 firms have signed onto the voluntary agreement, it seems that the protocol is growing fast and not shrinking at all.


Back in April, there were maybe 650 firms subscribing to the protocol.


The risk then was that firms would stick with the pact and water down its mandate in order to punish advisors who defect.


The wirehouses are unlikely to sue each other, since they mostly recruit from their counterparts inside that channel.


But when an RIA or other independent firm signs the protocol, it generally means they're looking to recruit advisors and ultimately clients from the wirehouses.


That's a more one-sided arrangement than the big firms signed up for, so they might be looking for ways around its rules.

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