Unlocking Clients

66 Pages Posted: 1 Mar 2018 Last revised: 2 Jun 2019

See all articles by Umit Gurun

Umit Gurun

University of Texas at Dallas

Noah Stoffman

Indiana University - Kelley School of Business - Department of Finance

Scott E. Yonker

Cornell University - Dyson School of Applied Economics and Management

Date Written: May 30, 2019

Abstract

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

Gurun, Umit and Stoffman, Noah and Yonker, Scott E., Unlocking Clients (May 30, 2019). Kelley School of Business Research Paper No. 18-29. Available at SSRN: https://ssrn.com/abstract=3132127 or http://dx.doi.org/10.2139/ssrn.3132127

Umit Gurun

University of Texas at Dallas ( email )

2601 North Floyd Road
Richardson, TX 75083
United States

HOME PAGE: http://www.umitgurun.com

Noah Stoffman

Indiana University - Kelley School of Business - Department of Finance ( email )

1309 E. 10th St.
Bloomington, IN 47405
United States
(812) 856-5664 (Phone)

HOME PAGE: http://kelley.iu.edu/nstoffma/

Scott E. Yonker (Contact Author)

Cornell University - Dyson School of Applied Economics and Management ( email )

Ithaca, NY
United States

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