(New York)

Morgan Stanley advisors look out, it appears the firm is sending a warning out to its wealth management force. According to Wealth Management, “Morgan Stanley in February filed a motion for a temporary restraining order and a preliminary injunction against a breakaway team in Farmington Hills, Mich. It was recently withdrawn. A lawyer for the breakaway team suggests that Morgan Stanley lawyers deliberately used the court filing, and prolonged the case, to make the conflict public and deter other breakaways”. One lawyer commenting on the moves says that Morgan Stanley is likely doing it to intimidate their current advisors into not jumping ship.

FINSUM: The end of the broker protocol made what was a tenuous environment into an all-out battlefield. This definitely seems like an intimidation tactic.

(New York)

The big question mark for advisors is whether they will need to keep cutting their fees in an effort to make themselves competitive with robo advisors. Bolstering additional services is another way to defend fees, but getting credit for these is difficult. Therefore, advisors might want to adopt an approach Ron Carson, from the Carson Group, uses. That method is to send clients not only an investment performance report, but also a “relationship timeline”, which shows all the services you have provided them, such “as the sale of a business or the analysis of expected Social Security benefits”, but could also including helping find mortgages, assisting with travel etc.

FINSUM: People are always very price-oriented and it becomes very easy for clients to forget just how much an advisor does. This seems like a good way to highlight it.

(Washington)

There is a currently a great deal of confusion surrounding the fiduciary rule, and understandably so. The rule is technically in force, but not fully, and there is even confusion over the interpretation of the rule and how it should be implied. With that in mind, lets clear up a few myths. The first and biggest myth is that the rule compels advisors to offer the lowest cost investment. It does not. It also does not mean advisors need to choose the “best” investment. While best interest is the rule, this does not mean advisors need to try to attain an impossible standard. Under the best interest contract, the three goals to meet under DOL rules are: “compensation paid to the broker-dealer and adviser is reasonable, recommendations must be in the best interest of the customer, and communications with the customer may not be misleading”. In terms of defining what “best interest” itself means, “’best interest’ requirement says that the recommendation must be prudent, take into account relevant information about the customer, and put the customer’s interests above those of the broker-dealer and the adviser”.

FINSUM: The confusion over the half-baked rule is very understandable, especially given the overall leadership vacuum surrounding its half-implementation.