Morgan Stanley just put a big threat on the table, and they are not alone. The bank says that it may withdraw wealth management services entirely from states considering new fiduciary rules, such as Nevada. Wells Fargo issued a similar threat. A number of states, including Nevada, New York, New Jersey, and Maryland, are considering making their own fiduciary rules. Such rules would be a major headache to the brokerage industry as they would create patchwork rules across the country. Morgan Stanley said bluntly “Absent substantial changes to the [state] proposal, Morgan Stanley will be unable to provide brokerage services to residents of the state of Nevada”. Edward Jones, TDA, and Charles Schwab also said they would need to at least pair back offerings.
FINSUM: This is a strong move by the brokerage industry but we do not think it will work. The political mood in the states mean lawmakers would rather say “good riddance” than back off, but time will tell.