MS Opens Fire On Bolting Brokers

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Buckeye's picture
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Joined: 2009-04-23

http://blogs.forbes.com/streettalk/2010/02/19/morgan-stanley-opens-fire-on-bolting-brokers/?partner=yahootix

Morgan Stanley Smith Barney is trying to send a message to brokers looking for the exits: Morgan Stanley Smith Barney is trying to send a message to brokers looking for the exits: You can leave, but you can’t take your rolodex with you.

The Morgan Stanley, Citigroup joint venture sued five prominent wealth managers this week who had recently bolted for HighTower Advisors, an upstart Chicago firm that has lured top talent away from the big banks. The lawsuit, filed in New York state court in Manhattan, is the first time a big Wall Street firm has sued investment managers headed to HighTower.
“This is a failed intimidation tactic,” Elliot Weissbluth, HighTower’s chief executive, told me. “All it does is confirm that the big brokerage firms realize we are a legitimate force that has to be reckoned with. This is an attempt to deter us, which will fail, an attempt to deter advisors who are leaving.”
Tough talk from a man who has made life difficult for big Wall Street firms that survived the financial crisis. In this excellent article, my colleague Matthew Schifrin gives a sense of what is going on. Weissbluth co-founded Hightower in 2008 with the backing of big shots like David Pottruck and Philip Purcell, offering advisors equity stakes and freedom from conflicts of interest. HighTower has already attracted $16 billion of assets.
But the big firms don’t like seeing big producers walk out the door with rich clients. Steven Ayer, Roman Ciosek, John Lang and Jeffrey Sullivan, left Morgan Stanley Smith Barney on the Friday before the February long weekend. They took their entire Strata Wealth Management Group, which handled $500 million in Rye, N.Y. Morgan Stanley says they had been plotting this exit for some time and solicited customers to follow them to HighTower while they were still working for Morgan Stanley Smith Barney.
Morgan Stanley Smith Barney wanted a temporary restraining order and preliminary injunction to stop them from “continuing the wrongful conduct.” Specifically, Morgan Stanley claims that in the days leading up to their resignation the advisors had solicited forty households they serviced to liquidate funds held at Morgan Stanley Smith Barney, making it easier to later transfer accounts away.  In addition, the lawsuit says the advisors had printed “a significant amount of customer account information,” including performance reports and other account data.  
HighTower’s Weissbluth says the Strata Group advisors did nothing wrong. Morgan Stanley declined to comment, but already its case is looking weak. Judge Lucy Billings has denied Morgan Stanley’s attempt to stop the advisors from soliciting customers, limiting them only from using or disclosing confidential information.

LockEDJ's picture
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Joined: 2009-07-06

It's my understanding that MSSB does not have a non-compete, non-solicit clause. Not true?

LogansRun's picture
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Joined: 2009-01-25

It the client's choice who they choose to work with and not a firm. This behaviour is why the Wire house firms are losers and they have to resort to these tactics rather than make themselves better and be the best place to run a business for FAs. Too bad they try to undermine FA / Client relations by constantly trying to ensure a client deals with 'the firm.'   YOU DON'T OWN A CLIENT. These firms have become too big and management forgot who their real client's are - FAs. You cannot prevent a client from working with who THEY want to work with.
As long as they resort to this, they show their true colors. This is why all brokers should reject senior management policies and associate with firms that acnkowledge that the FA is the link to the client. Reading this only reiterates why I left the wire house world.

fritz's picture
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Joined: 2006-01-12

I think the era of wirehouse brokerage firms is over.  In the next few years it will be one domino to fall after the other.   If/When the brokerage firms lose the lawsuit pending about whether the deals brokers are on are valid or not...If Theirman, who won hundreds of millions from the firms for the overtime, error account, and other issues wins this case 50,000+ brokers will be free to leave the wirehouses without recourse in regards to their note.  Time will tell, but the firms no longer have any name cache to keep retail brokers, there is not one firm that the "name brand" is worth 1% of your gross.

Sportsfreakbob's picture
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Joined: 2008-08-24

It is very puzzling to me why MSSB and the rest of the wires think they are so different than "leaders" of other industries. No other industry could get away with this crap. Why is it any different than an ad exec leaving his agency and taking his accounts with him? I just dont get it. Pompous asshole firms.

Indyone's picture
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Joined: 2005-05-31

Talked to a friend today that is being told by his current employer that he cannot even accept clients of his former employer...not even if they initiate the transfer request...how stupid is that?!!

LockEDJ's picture
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Joined: 2009-07-06

Indyone wrote:Talked to a friend today that is being told by his current employer that he cannot even accept clients of his former employer...not even if they initiate the transfer request...how stupid is that?!!
 
Smells like Edward Jones to me.

Gaddock's picture
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Joined: 2007-02-23

Indyone wrote:Talked to a friend today that is being told by his current employer that he cannot even accept clients of his former employer...not even if they initiate the transfer request...how stupid is that?!!
 
That's a certain way to get the biggest pikers that live on board.

howboutshoeshine's picture
Joined: 2010-01-29

Sportsfreakbob wrote:It is very puzzling to me why MSSB and the rest of the wires think they are so different than "leaders" of other industries. No other industry could get away with this crap. Why is it any different than an ad exec leaving his agency and taking his accounts with him? I just dont get it. Pompous asshole firms.
 
How many companies could jsut decrease your pay by 25% without any consequences??
I would love to see any other industry try that! I don't know if it's because we are so hated or because Goldman basically tells Washington what and how to do it. Oh ya......they will lend you your own money st 3.5%. Wonder how much they make from that deal?

LockEDJ's picture
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Joined: 2009-07-06

Gaddock wrote:Indyone wrote:Talked to a friend today that is being told by his current employer that he cannot even accept clients of his former employer...not even if they initiate the transfer request...how stupid is that?!!
 
That's a certain way to get the biggest pikers that live on board.

Huh? I don't understand what you are saying here ...

Greenbacks's picture
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Joined: 2004-12-21

And yet reps stay
 
Even the slaves in the south left there masters! 

Omar's picture
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Joined: 2009-03-19

Great story, enjoy hearing about other producers who realize how much they get porked by the wires. It's funny, the more Advisors leave, the more the wires deny that they are being hurt by the lost assets. Yet, now they are going to sue?    Hysterical.

Sportsfreakbob's picture
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Joined: 2008-08-24

I really believe that none of this matters. Because I believe the wires are going to a smaller model, only clients with $1MM and up, only producers doing $1MM and up. This will evolve over time. They don't care if the 400-500k producers walk.They have been "coaching" advisors for years to get rid of the lower producing clients in their book, that 80% of their gross comes from 20 % of their clients so get rid of the other 80% (or maybe a little less). Now they are just practicing what they preach.

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