Property Rights to Client Relationships and Financial Advisor Incentives

Research output: Contribution to journalArticlepeer-review

2 Scopus citations


We study the effect of a change in property rights on employee behavior in the financial advice industry. Our identification comes from staggered firm-level entry into the Protocol for Broker Recruiting, which waived nonsolicitation clauses for advisor transitions among member firms, effectively transferring ownership of client relationships from the firm to the advisor. After the shock, advisors appear to tend to client relationships more by investing in client-facing industry licenses, shifting to fee-based advising, and reducing customer complaints. Our findings support property rights based investment theories of the firm and document offsetting costs to restricting labor mobility.

Original languageEnglish
Pages (from-to)2409-2445
Number of pages37
JournalJournal of Finance
Issue number5
StatePublished - Oct 2021

Bibliographical note

Funding Information:
Clifford and Gerken are at the Department of Finance & Quantitative Methods, University of Kentucky. We thank conference participants at the 2017 MarketCounsel Summit (Miami), Mid‐Year Fellows Workshop in Honor of Louis O. Kelso (Rutgers University), SFS Cavalcade (Yale University), Professional Asset Management Conference (Erasmus University), Mitsui Symposium on Labor and Finance (University of Michigan), Western Finance Association (San Diego), European Finance Association (Warsaw), and MSUFCU Conference (Michigan State University) and seminar participants at American University, Elon University, Georgia Institute of Technology, and North Carolina State University. We especially thank John Bizjack (discussant), Sudheer Chava, Jess Cornaggia (discussant), Juan Pedro Gomez (discussant), Umit Gurun, Alan Kwan, Phil Mellizo (discussant), Brian Melzer (discussant), Paige Ouimet, Alessandro Previtero (discussant), Amit Seru (Editor), Scott Yonker, the associate editor, and two anonymous referees for valuable comments. We acknowledge the support of the Institute for the Study of Free Enterprise. Finally, we are grateful to Jeremy Wallace of Wallace Hart Capital Management for helpful discussions about the Protocol. We have read disclosure policy and have no conflicts of interest to disclose. The Journal of Finance

Publisher Copyright:
© 2021 the American Finance Association

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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