Unlocking clients: The importance of relationships in the financial advisory industry

We investigate the importance of client relationships in the financial advisory industry. We exploit firm-level variation in adoption of the Broker Protocol, which enabled clients to follow their advisers to member firms without fear of litigation. We show that advisers’ ability to maintain client relationships is a significant predictor of their employment decisions; that about 40\% of client assets follow advisers when they move; and that once clients are ``unlocked,” firms become less willing to fire advisers for misconduct. Firms that unlock their clients subsequently experience higher levels of misconduct and increase their fees, calling into question whether clients are better off.