Rumor – Renewed Protocol Strategy Chatter Bubbles Up Again At Merrill Lynch; To Stay Or Go

In several short conversations over the past two weeks, the specter of a Merrill Lynch/BofA protocol exit seems to have found new life.

Despite denials in early 2020 by the firm’s senior management team, that an exit wasn’t on the table short term, nothing was said about it being completely off the table long term either. It seems that omission was either strategic or possibly prophetic.

As we hear it, the continual and aggressive drain of large scale teams and billions in client assets has given management reason to take another look at the protocol exit moves made by UBS and Morgan Stanley. The decision has certainly served Morgan Stanley well and has become significantly more palatable to advisors at MS.

Merrill Lynch is weighing the pros and cons of executing the same type of strategy. While we may not know how a decision shakes out, or if it simply continues to be a potential weapon that remains on the table should a larger crisis shock the economy at some point – a protocol exit wouldn’t surprise anyone for Merrill and BofA.

In fact, it would be decidedly ‘on brand’.

UBS Rumors Only Add To Attrition Issues – Large Teams Step Up Exit Due Diligence

UBS has been losing advisors for more than two years now. The firm has teetered on the brink of falling below the 6k headcount mark across the US for several quarters. Two years ago, that number was above 7k. Attrition at the firm, amongst its most productive advisors and teams, is a real problem.

In discussions with sources at the firm, the internal numbers are even worse. Currently, over the past year, only two managers in the entire country can claim a ‘net-plus’ number in headcount/recruiting. Even managers that have recruited well have lost more than they can bring in. Again (and to make the point clear), 95% of UBS branches and complexes have fewer advisors, assets, and revenue than they did a year ago.

And it’s about to get worse.

The revelation that UBS brass is seriously considering a merger with Credit Suisse (or any other potential sizable global bank) has the best and the brightest at UBS understandably spooked. Forget about the industry planted articles claiming that “not much will change for UBS Americas advisors in the event of a merger” – you know better than to believe that drivel.

Any serious industry veteran will tell you that a Credit Suisse tie-up will most certainly have ripple effects (at best) that are felt here in the US. Advisors could be forced to tie themselves to the firm with a fresh new retention deal, with plenty of non-protocol (read: non-compete and non-solicit language) legal hoops to embrace. And the value of the retention deal with be less than half as lucrative as any competitive recruiting offer. Comp will be adjusted down again in the coming years, management reduced (again), and the pivot to a private banking framework will be on the march.

The best and brightest at UBS understand this and are smartly evaluating their options. Meetings and phone calls have increased and the pipeline of firms like Rockefeller and the First Republic and bursting at the seams with UBS teams.

As a quick final thought for current UBS employees – do you think that Merrill Lynch advisors have enjoyed that last decade of changes at their vanishing brand? No, no they haven’t.

Rumored JP Morgan Securities Protocol Exit Could Damage Practice Valuations, Complicate Transitions

In a move that may not surprise anyone (given the continuing consolidation of advisors inside the JP Morgan ecosystem), we are hearing that JP Morgan Securities is about to bow out of the broker protocol.

The move would serve to make it more difficult, and incrementally litigious, for advisors at the firm to move to a competitor. Should these rumors be ultimately true every advisor of note at JPMS should be scurrying to gather their due diligence on potential greener pastures – a protocol exit is an easy sell when convincing clients why you chose to leave the bank.

JP Morgan has made a concerted effort to consolidate Chase, JPMS, and the Private Bank in hopes to make sure the client experience is the same across all platforms (i.e. lending, asset management, reporting, trust, and estates). The idea being: if there is one client- there is one advisor.

That advisor representing the entire firm, though, should endure the same restrictions (non-solicit, non-compete, and non-protocol) as their brethren at Chase and the firms Private Bank.

Make no mistake, a protocol exit for JPMS advisors will have a direct effect on their practice valuations. In the same way that UBS and Morgan Stanley teams were adversely affected in the months following each firm’s protocol exits; the same dynamic will be in play for JPMS advisors. The smart move is to act with purpose and urgency.