66 Pages Posted: 1 Mar 2018 Last revised: 2 Jun 2019
Date Written: May 30, 2019
We investigate the effects of non-compete agreements (NCAs) in the market for financial advice using variation in firm-level adoption of the Broker Protocol, which relaxed enforcement of NCAs between member firms. We show that overall adviser departures do not increase, but advisers move strategically to member firms and take client assets with them, generating significant relationship-based flows. When NCAs are relaxed, firms become less willing to fire advisers for misconduct and advisers’ propensities to engage in misconduct and client fees increase. Our findings question whether the costs of “unlocking” clients from their advisory firms outweigh the benefits.
Keywords: Broker Protocol, Non-Compete, Financial Adviser, Advisor Career, Financial misconduct, Labor Mobility
JEL Classification: D18, G00, G20, G24, G28, J60, J41, J24, K22, K31
Suggested Citation: Suggested Citation