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Brokers Fleeing Wells Fargo Head To Regional B-Ds

By Erwin J. Shustak, Esq. of Shustak Reynolds & Partners, P.C. posted on Wednesday, July 11, 2018.

Erwin J. Shustak

Erwin J. Shustak

Managing Partner

LocationSan Diego, California
New York, New York
Phone: (619) 696-9500 (Ext. 109)
(800) 496-5900 (Ext. 109)
Email[email protected]

In prior blogs, we wrote about the increasing movement of brokers and investment advisors from the remaining “wirehouses” (Morgan Stanley; UBS; Wells Fargo; Merrill Lynch) to one of many independent platforms. 

Not only is that trend continuing, but the largest net loser of registered representatives is Wells Fargo, which has been the subject of many negative news articles about the breach of trust committed by Wells Fargo in opening accounts and credit cards that customers never authorized or even knew about. The fallout from all that negative news about Wells Fargo continues.

During 2018, year to date, of the 133 wirehouse advisors who left their firms to join a smaller, regional BD or RIA, approximately 60% have come from Wells Fargo alone. According to a study by On Wall Street, the exodus of brokers from Wells Fargo to regional firms 2018 year to date is nearly double the percentage for the first six months of 2017, when Wells Fargo departures represented just 33% of the 126 wirehouse advisors moving to smaller, regional firms.

The hiring announcements by regional firms indicate that regional firms’ draw is strong due to a shifting financial industry landscape that has tilted the playing field in their favor. One of the biggest changes has been the result of technology changes. Now, smaller firms are able to offer the same technology and back office support previously available only at the major wirehouses. Not unlike the changes that have affected many service industries, from law to accounting. 

The second biggest reason is the flexibility and independence, as well as much higher payouts, offered by the regional firms that offer an advisor a better quality of life outside a major wirehouse.

During the same period of time, while almost 61% of the advisors making the shift from a wirehouse to a regional independent, UBS saw a shift of 11%; Morgan Stanley 8% and Merrill Lynch 20%. One of the reasons Morgan and UBS may have had so few departures to regional firms is that both Morgan and UBS exited the Broker Protocol at the end of 2017, essentially pulling up the drawbridge with very little notice and preventing advisors who may otherwise have wanted to leave those firms stuck without the ability to transition to another firm with the safe harbor benefit of the Broker Protocol.  Wells Fargo, on the other hand, continues to be a party to the Broker Protocol making it much easier for Wells Fargo advisors to flee the firm under the safety net of the Protocol.

Shustak Reynolds & Partners, P.C. focuses its practice on securities and financial services law and complex business disputes. We represent many broker-dealers, registered representatives, investment advisors, investors, and businesses. For more information, contact Erwin J. Shustak, Managing Partner [email protected], or call 800.496.5900 ext. 109.

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