|
Unless you are particularly interested in the US wealth management business, you probably missed one of the most extraordinary announcements of 2017 at the beginning of November. Extraordinary in that any bank was able to make it in the first place.
Morgan Stanley broke ranks to announce its withdrawal from the Protocol for Broker Recruitment, which has been in place in the US brokerage industry since 2004. Originally established by a handful of firms, by 2017 a staggering 1,500 firms were signed up to it. Some banks, including JPMorgan, were often accused of having some business units signed up to the protocol and not others, thereby gaming the system.
The protocol was designed to put a stop to expensive lawsuits filed by brokers that had lost top advisers who took their roster of clients to rival firms. In return, those advisers would agree not to solicit other clients from their old shop to join their new firm unless it was compensated for the loss of business.
Yes, that’s right. In an era where the merest whiff of collusion could bring a multi-billion dollar fine or even a jail sentence to the unlucky few, the biggest names in US finance were engaged in a voluntary restrictive practice, which apparently US regulators thought was not worthy of any kind of investigation.