EXCLUSIVE: Morgan Stanley Brokers Jump to Ameriprise, Win in Court
(Updates in third paragraph to reflect when Morgan Stanley left the Protocol.)
Chalk one up for Morgan Stanley brokers (and the firms and recruiters trying to hire them in the post-Protocol era).
A Texas county judge on Wednesday denied Morgan Stanley’s request to prevent the father-son team of G. Roger Daniel and Bryan Daniel from contacting their former customers at their new employer, Ameriprise Financial.
The decision appears to be the first denial of Morgan Stanley’s courtroom motions for temporary restraining orders since it left the Protocol for Broker Recruiting in early November.
The father-and-son brokerage team, who had worked at Morgan Stanley’s Temple office in central Texas for 37 and 21 years respectively, joined the employee channel of Ameriprise on on January 12, a spokeswoman for the Minneapolis-based financial services company confirmed.
A spokeswoman for Morgan Stanley, who earlier this week said the firm had prevailed in all of its recent TRO attempts, declined to comment on the case or whether it will continue to pursue the Daniels and Ameriprise in arbitration.
Morgan Stanley, UBS Financial Services and Citigroup’s withdrawal from the Protocol, which permits brokers to bring rudimentary customer-contact information with them when they move to another signatory firm, has created a stir within the retail brokerage industry.
They view the Protocol that they helped create more than a decade ago as a one-way street now that they have tapered recruiting budgets and are poached for talent by many of the more than 1,000 smaller broker-dealers and registered investment advisory firms in the pact.
But regional firms that are actively recruiting have positioned the Protocol exits and resultant lawsuits as restricting brokers’ and investors’ right of choice, and some have asked regulators to intervene in preserving the pact.
“Clients have the right to choose their advisors, and [to] know where they are going,” Raymond James Financial CEO Paul Reilly said on an earnings conference call on Thursday.
Lawyers have said that Morgan Stanley’s tightly drawn employment contracts, ethics codes and account-inheritance documents have made it difficult for courts to oppose its TRO motions, which the firm supplements with complaints for longer-term remedies in arbitration.
Reilly and Ameriprise Chief Executive Jim Cracchiolo both said Thursday that their firms are experienced at walking potential hires through the exigencies of transition, even when leaving firms no longer in the pact. Raymond James recently hired a UBS broker in California, a state that has relatively friendlier employee-protection laws than Texas.
“We have a good process in place, so we feel good about our ability to continue to recruit if advisors are interested in joining us,” Ameriprise’s Cracchiolo told analysts on the firm’s earnings call on Thursday.
The Morgan Stanley motion was filed in Bell County, Texas.
“If you have a liberal judge, the individual will probably be favored over the corporation, but Texas is not known as a state with a lot of liberal judges,” said Kevin Hoffman, an employment lawyer in Greenwich, Conn., who was not involved in the Daniels case.
The Daniels managed around $328 million in assets and generated around $1.8 million in production, said Kathleen McClung, the Ameriprise spokeswoman.
“We are pleased with the outcome,” she wrote in an e-mail. “Financial advisors are allowed to switch firms, and movement across the industry is common.”
Neither Roger Daniel, who began his brokerage career at A.G. Edwards in 1977, nor his son—who after working as an intern at PaineWebber joined his father at Morgan Stanley in 1996—returned calls for comment. Roger Daniel has periodically served as a branch manager for Morgan Stanley’s small Temple office, according to his LinkedIn profile.