UPDATE: Morgan Stanley Brokers Jump Early Under Protocol Pressure
(Updates top half with additional hires from J.P. Morgan Securities.)
Morgan Stanley’s planned exit from the Broker Protocol on Friday morning prompted brokers around the country on Thursday to accelerate moves to other firms.
J.P. Morgan Securities appeared to be the main beneficiary, hiring a handful of billion-dollar-asset teams or multi-million-dollar producers in at least three cities. In New York, Colleen O’Callaghan and her eight-person team joined after managing some $3 billion in client assets at Morgan Stanley, a JPMorgan spokeswoman confirmed. O’Callaghan, who moved to Morgan Stanley in 2008 from Lehman Brothers, had been chairman of Morgan Stanley’s Private Wealth Advisor Council and was ranked number one on Forbes’ list of the Top Women Financial Advisors in 2017, according to her team’s former website.
In Dallas, 30-year veteran Joel Tannebaum, who had been with Morgan Stanley since August 2000, moved to a branch of J.P. Morgan Securities, along with Dale Mitchell, a broker for 27 years who had joined Morgan Stanley Dean Witter in 2006. Tannebaum, who produces just under $2 million for some 38 household accounts and Mitchell, whose separate practice generates about $1.1 million of trailing-12 production, had planned to move next week but jumped early because of the Protocol announcement. They were joined by portfolio associate Emily Krivacek.
In Boston, J.P. Morgan Securities hired the team of Frank Botta, Daniel McCarron and Mike Coyne, who had a combined $3.8 million in production and $1.1 billion in assets, the spokeswoman confirmed. The group had planned to move in December, but similarly accelerated their plans following Morgan Stanley’s announcement, according to a source familiar with their business. Neither could be reached for comment after business hours on Thursday.
Also in Boston, J.P. Morgan Securities hired L.O. Patrick Corbett, Robert F. Mason, and Daniel Warren, who worked as The Corbett Mason Group within Morgan Stanley’s private wealth unit and oversaw $1.2 billion in client assets, according to the JPMorgan spokeswoman.
Regional broker-dealers also landed several Morgan Stanley advisors on Thursday. Stifel Financial Corp.’s Stifel, Nicolaus & Co. said it hired the team of Ken Ramos, Gary Rudow and two associates in New York City who oversaw some $325 million of customer assets as well as veteran wirehouse advisor Henry Enno and a client associate in Springfield, Illinois.
RBC Wealth Management, which is led by former Morgan Stanley wealth management executive Michael Armstrong, said it recruited Dallas brokers Paul Hendershot and Carsten Frederikson, who have production of about $1.2 million and assets under advisement of around $140 million. They had been with Morgan Stanley since 2010.
“Given the confusion caused by Morgan Stanley’s withdrawal from Protocol, we moved up the teams’ start date to avoid any potential litigation until legal precedent is set,” said John Pierce, head of recruiting at St. Louis-based Stifel’s private client group.
Advisors can join the almost 1,600 firms belonging to the inter-industry pact without fear of being sued for contract and privacy-right violations for taking rudimentary client contact information with them. Morgan Stanley said on Monday that it was withdrawing from the Protocol because many smaller firms were joining simply to hire experienced brokers from larger firms.
“I thought going under Protocol made it a little easier,” said Enno, who began his career in 1986 at Merrill Lynch before joining Smith Barney in 2008 and segueing to Morgan Stanley the following year. “They are now big institutions, and I wanted something smaller where I know who the CFO and CEO are and can pick up the phone and call them.”
Enno, who said his senior vice president title at his former firm indicates that he was a million-dollar producer, gave Morgan Stanley his notice around 11:15 am on Thursday. He said he knew he made the right decision after former Merrill Lynch private client group head Launny Steffens called him to say the move was “the right thing to do.”
Pierce declined to discuss whether Steffens, founder of private equity firm Spring Mountain Capital, has an investment or other relation with Stifel. Steffens did not return a call for comment.
Morgan Stanley’s decision to leave the Protocol after more than a decade has set off a storm of questions from brokers, headhunters and lawyers as to whether it can prohibit brokers who it hired under the pact’s protections from taking contact information for customers who they brought to the firm.
“I think they’ll have a lot of explaining to do after 13 years where they were able to hire people under the Protocol who brought in accounts and client information and all of a suddenly decide it’s not OK,” said Thomas B. Lewis, a lawyer at Stevens & Lee who said he represents some brokers who were leaving Morgan Stanley on Thursday.
If the firm goes to court or arbitration to impose restraining orders on former employees, “there could be a legal basis to challenge them,” he said.
Stifel’s Pierce said moving some advisers while still under the Protocol’s protection eases the transition for them and their clients and families but added that Morgan Stanley will likely be vulnerable even after its exit occurs. “I personally don’t believe that FAs and their clients that went to MS under Protocol will be adversely treated by the courts when they choose to leave that firm,” he wrote in an email.
Some Morgan Stanley brokers said they have colleagues who have jump-started plans to join competing wirehouses and large banks before the Friday morning deadline, but declined to name them before licenses are transferred.
Other smaller firms said they were on the verge of making announcements.
“We have a large team joining in Denver set to resign,” Nate Lenz, head of business development at independent firm Concurrent Advisors wrote in an email Thursday afternoon, without naming the advisors. The advisory firm uses Raymond James Financial Services as its broker-dealer.