As reported today by Investment News, Edelman Financial Services LLC is pulling out of the Protocol for Broker Recruiting as of June 1. The “Broker Protocol” permits representatives to take basic customer contact information when they change firms and, if followed, the representatives can solicit their clients regardless of having signed a non-solicit agreement with their firm.
Edelman Financial Services, the fast-growing firm, based in Fairfax, Va., joins several other large advisory firms that have pulled out of the pact in recent years, including Savant Capital Management Inc., Convergent Wealth Advisors and Buckingham Asset Management LLC. According to the firm’s chief executive Ric Edelman, “None of our business units are engaged in the recruiting of brokers who have books [of business], so there’s no value to us in being a member” of the recruiting pact. Withdrawing from the protocol also ensures the firm’s non-solicitation agreements can be enforced, Mr. Edelman added.
Of other withdrawing firms, Edelman commented, “They may have reached the same conclusion we did, that the only value from the protocol is for firms that actively recruit brokers with books,” Mr. Edelman said. “If you’re not doing that, there’s no value.” Still, many firms still find value in the Broker Protocol, which was created by several wirehouse firms in 2004. In total, 969 financial firms have joined, while only 31 have withdrawn.
It is our opinion that even if a firm is not actively bringing on representatives from other Broker Protocol firms (but can foresee it happening), the only reason not to stay on as a member of the group is if the firm wants to enforce non-solicit agreements on its representatives.