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How Banks Are Losing Clients to Their Own Employees

  • Defection of $2 billion team aided by non-aggression agreement
  • Protocol for Broker Recruiting paves way for 1,000 upstarts
Morgan Stanley headquarters in New York.

Morgan Stanley headquarters in New York.

Photographer: Victor J. Blue/Bloomberg
Corrected

Morgan Stanley could do little but watch as a team of advisers overseeing $2.2 billion in assets quit last month to start their own shop, the latest in a string of departures that have shifted billions of dollars in assets away from big Wall Street banks.

After months of secret and meticulous planning, 13 employees in Wichita, Kansas, left on a Friday with phone numbers and e-mail addresses for 800 clients, and then spent a frantic weekend on the phone trying to get them to switch to their upstart. It all depended on a gift from Morgan Stanley: Years earlier, the bank had signed away its right to sue.