Citigroup to exit broker pact after Morgan Stanley, UBS Group left

Bloomberg

Citigroup Inc. is withdrawing from an industry pact designed to allow financial advisers to change companies without being sued by for-
mer employers, further unrav-
eling the accord after Morgan Stanley and UBS Group AG said they would pull out.
“Similar to others in the industry, Citi has decided to exit the protocol,” company spokesman Drew Benson said in an emailed statement. “This decision allows us to continue to
invest in our growing team of award-winning financial advisers.”
Morgan Stanley’s decision in October to defect from the Protocol for Broker Recruiting fuelled concerns in the industry that others would depart. UBS signaled its plan to do so soon after. The agreement, signed in 2004, was designed to mitigate lawsuits when advisers left to join a competitor. Almost 1,700 firms have signed the protocol.
Citigroup, which is exiting the pact on Jan. 8, has about 1,000 financial advisers and relationship managers in the US as part of its Citigold service, according to a person familiar with the business who asked not to be identified. AdvisorHub reported the news.
The protocol was created by three firms and gives departing advisers a waiver from the non-solicitation agreements common in the industry. That helps advisers move books of business to other firms as long as they bring only a limited amount of client information with them.
Morgan Stanley said in October that the pact had become full of “opportunities for gamesmanship and loopholes,” making the accord unsustainable. Many of the large wirehouses had already announced initiatives to pull back from recruiting new financial advisers.
Still, not all firms have been eager to leave the accord. Andy Sieg, who leads Bank of America Corp.’s Merrill Lynch, told his leadership team Dec. 4 that the company wasn’t planning to leave the protocol although it was monitoring the competition, a person familiar with the matter said at the time. Raym-
ond James Financial Inc. Chief Executive Officer Paul Reilly said in November that the company would stay in the agreement even if it was the “last firm standing.”