Disillusioned Brokers Seek “Greener Pastures”


The upheaval in the financial industry has prompted long time brokers in the full-service brokerage firms like Morgan Stanley Smith Barney, Bank of America Merrill Lynch, and UBS Wealth Management Americas to make a break for independence. New smaller firms with strategic alliances within the industry have rewarded these brokers with more flexibility to be more client-centered. But all of this freedom comes with risks as well.

It is not uncommon for the corporate climate to be turned upside-down when a new boss enters the picture. Each company has its own culture and just as customers choose their brokers for their personality and the way they do business, so also the brokers choose what companies to affiliate with according to what works for them. As reported by Bloomberg News in the October edition of the magazine, InvestmentNews, once Morgan Stanley took over Smith Barney, new maintenance fees were instituted and many brokers felt like their autonomy had been taken away. A once pleasant environment suddenly became uncomfortable. Similar versions of this scenario have spurred the exodus.

Not all brokers started their own firms. Some were recruited elsewhere and all took as many clients as possible with them. The large firms lost assets along with brokers but the brokers became more competitive and had fewer conflicts of interest. They no longer had to push the investments with the largest commissions. Discount brokerages like Schwab and TD Ameritrade benefited the most from the increase in independent brokers. Their fee based services to independent advisors and other businesses have increased phenomenally.

A financial planner can play to his strengths while shopping for the best investments the world has to offer for his clients. Alliances with discount brokerages can also work in both directions. When customers need help with investing, the discount brokerages refer them to the independent brokers.

The downside to possible nirvana for the brokers who “dare” can suddenly put them in a minefield of legal problems. Employment contracts, customer list disputes ? “yours” or “mine”, bonus loan disputes, confidential information restrictions and non-compete clauses are just a few of the legal issues that can interfere with a fresh start. Each individual has to weigh the pluses and minuses of these issues when making a change. Any broker contemplating a job transition is well-advised to seek counsel prior to jumping ship.

Page Perry is an Atlanta-based law firm that has helped a wide variety of clients with employment law concerns. The firm’s employment law services range from drafting or advising clients about employment agreements and related documents to litigating or arbitrating employment related disputes in the securities and financial services industries. While past successes are not indicative of future reslts, the firm has recently won arbitration awards in securities industry employment disputes in the amounts of $1.7 and $3.9 million. For further information, please contact www.pageperry.com.