Citigroup is withdrawing from an industry pact designed to allow financial advisors to change companies without being sued by former employers, further unraveling the accord after Morgan Stanley and UBS 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 advisors.”
Morgan Stanley’s decision in October to defect from the Protocol for Broker Recruiting fueled 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 advisors left to join a competitor. Almost 1,700 firms have signed the protocol.
Citigroup, which is exiting the pact on January 8, has about 1,000 financial advisors and relationship managers in the U.S. as part of its Citigold service, according to a person familiar with the business who asked not to be identified. AdvisorHub reported the news on Friday.
The protocol was created by three firms and gives departing advisors a waiver from the non-solicitation agreements common in the industry. That helps advisors 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 advisors.
Still, not all firms have been eager to leave the accord. Andy Sieg, who leads Bank of America's Merrill Lynch, told his leadership team in December 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. Raymond James' CEO Paul Reilly said in November that the company would stay in the agreement even if it was the “last firm standing.”