Only one month after Morgan Stanley withdrew from the Protocol for Broker Recruiting (the “Protocol”), a second major brokerage firm has announced its intention to withdraw effective December 1st. UBS says it is withdrawing as part of a strategy to focus on retaining its current brokers instead of recruiting brokers from competitors. [i] Still, many observers believe Morgan Stanley’s and UBS’s withdrawals are meant “to stanch the flow of brokers and client assets.”[ii] This flow, of course, has quickened in recent years as advisers have left traditional, large brokerage firms to form independent advisory firms.[iii]

When Morgan Stanley withdrew from the Protocol, many speculated as to whether the Protocol would survive.[iv] Such speculation has only increased as sources have confirmed that Morgan Stanley’s withdrawal was the catalyst for UBS’s departure.[v] We expect more firms are currently considering how to respond to two of the largest brokerage firms withdrawing from the Protocol, and we would not be surprised to see similar announcements before year-end.