Three Large Brokerage Networks Offering Significant Recruiting Bonuses in 2019

Three Large Brokerage Networks Offering Significant Recruiting Bonuses in 2019

From the Desk of Jim Eccleston at Eccleston Law LLC:

As Merrill Lynch, Morgan Stanley and UBS Financial Services, Inc. have recently pulled back their recruiting efforts in order to focus on growing assets and revenue internally, firms such as Wells Fargo Advisors, LPL Financial and Cetera Financial Group are seeking the opportunity to gain ground by offering attractive recruiting bonuses.

According to Investment News, Wells Fargo Advisors is currently offering an upfront bonus payment of 225% of an adviser’s T-12 if he or she generates more than $500,000 in annual fees and commissions. Furthermore, the deal also includes additional deferred compensation and other payments over time worth 100% of an adviser’s prior year’s fee and commissions.

In addition, last year, LPL introduced a recruiting package in the form of a 3-year forgivable loan which pays an adviser 50 basis points on assets under management transferred to the firm. As a result of this offer, the third and fourth quarters of 2018 were LPL’s best recruiting quarters on record for the firm as it gained a net 899 advisers with $27.3 billion in brokerage and advisory assets.

Following LPL’s footsteps, Cetera Financial Group has announced that the firm will start to offer certain recruits 70 basis points on advisory assets that move to the firm and 35 basis points on brokerage assets. Cetera Financial Group stated that those deals would be in the form of forgivable notes or loans that would span five to seven years.

The attorneys at Eccleston Law assist financial advisors nationwide in their employment transitions, negotiate their transition agreements (including employment agreements and forgivable loans), and defend reps in arbitration and litigation during and after their transition.

The attorneys of Eccleston Law LLC represent investors and advisors nationwide in securities and employment matters. The securities lawyers at Eccleston Law also practice a variety of other areas of practice for financial investors and advisors including Securities FraudCompliance ProtectionBreach of Fiduciary DutyFINRA Matters, and much more. Our attorneys draw on a combined experience of nearly 65 years in delivering the highest quality legal services. If you are in need of legal services, contact us to schedule a one-on-one consultation today.

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UBS and Morgan Stanley’s Decision to Leave the Protocol for Broker Recruiting Has Paid Off for Them

UBS and Morgan Stanley’s Decision to Leave the Protocol for Broker Recruiting Has Paid Off for Them

From the Desk of Jim Eccleston at Eccleston Law LLC:

Since UBS and Morgan Stanley’s decision to pull out of the Protocol for Broker Recruiting last year, the number of advisors departing those firms appears to have slowed. This is good news for Morgan Stanley and UBS which want to reduce recruiting costs and instead focus on the growth of their advisors’ book of business through investments in technology.

More specifically, according to Investmentnews data, Morgan Stanley has cut in half its attrition rate since exiting the Broker Protocol. Data from UBS is less clear but it is likely also that the firm has cut its attrition rate as well.

Experts point to attrition rate cuts at Morgan Stanley and UBS as a result of challenges advisors face when deciding to leave their current firms because they are currently not protected under the Broker Protocol.

Furthermore, the biggest challenge departing financial advisors face is the threat or the actual filing of a temporary restraining order by their former firms. Moreover, since leaving the Broker Protocol, Morgan Stanley, UBS Financial Services and other firms have filed TROs to prevent their former financial advisors from contacting, soliciting and doing business with their former clients.

Morgan Stanley, for instance, has filed at least four temporary restraining orders in federal courts against their former financial advisors and has been successful in those actions. Significantly, one former Morgan Stanley advisor even lost his new job at an RIA after the wirehouse filed a TRO against him immediately after leaving the firm.

These cases and many others underscore the need for financial advisors to retain competent securities counsel to extensively plan their transition. While no transition is stress-free, it is crucial for financial advisors to be prepared to win the TRO fight. The attorneys at Eccleston Law do so, specifically, we assist advisors in planning their transition, negotiating their transition and employment agreements, and defending them when their former firms file litigation and arbitration.

The attorneys of Eccleston Law LLC represent investors and advisors nationwide in securities and employment matters. The securities lawyers at Eccleston Law also practice a variety of other areas of practice for financial investors and advisors including Securities FraudCompliance ProtectionBreach of Fiduciary DutyFINRA Matters, and much more. Our attorneys draw on a combined experience of nearly 65 years in delivering the highest quality legal services. If you are in need of legal services, contact us to schedule a one-on-one consultation today.

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Wells Fargo Loses 152 Advisors Last Quarter

Wells Fargo Loses 152 Advisors Last Quarter

From the Desk of Jim Eccleston at Eccleston Law LLC:

Wells Fargo Advisors has reported that 152 advisors have left the firm in the third quarter of this year. Those third-quarter losses bring the total number of departing advisors to more than 1,000 since September 2016.

Commentators suggest that the large number of Wells Fargo advisor departures can be attributed mainly to the steady flow of scandals that have damaged the firm’s reputation since September 2016.

More specifically, revelations that Wells Fargo’s banking division allegedly had opened millions of fee-bearing bank accounts in clients’ names without their knowledge has caused a public outcry and other wrongdoings have also surfaced in the firm’s mortgage and auto loan business departments.

In addition, this year, the state of Massachusetts filed an enforcement action against Wells Fargo Advisors for allowing its advisors to make unsuitable product and retirement planning recommendation, as well as for systemic reverse churning practices among its advisors.

Eccleston Law assists advisors nationwide in transitioning to new financial services firms, defending them in court and in arbitration.

The attorneys of Eccleston Law LLC represent investors and advisors nationwide in securities and employment matters. The securities lawyers at Eccleston Law also practice a variety of other areas of practice for financial investors and advisors including Securities FraudCompliance ProtectionBreach of Fiduciary DutyFINRA Matters, and much more. Our attorneys draw on a combined experience of nearly 65 years in delivering the highest quality legal services. If you are in need of legal services, contact us to schedule a one-on-one consultation today.

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Whose clients are they? Edward Jones sues $150M Ameriprise advisors

From the Desk of Jim Eccleston at Eccleston Law LLC:

This article was originally published at https://onwallstreet.financial-planning.com/news/edward-jones-sues-150m-ameriprise-advisors-for-alleged-solicitation-of-clients by Andrew Welsch

Edward Jones is suing two advisors who moved to Ameriprise for allegedly violating non-solicitation agreements, making this the latest case of a brokerage firm taking its former employees to court over client contacts.

At stake is the $150 million in combined assets that Edward Jones says the duo oversaw (an Ameriprise spokeswoman says they had $215 million). Edward Jones asserts that clients have already transferred more than $19 million to its rival Ameriprise.

Edward Jones claims advisors Debra Feaser and Michael Eisenbraun have taken confidential information, accusing them of printing out lists containing more than 1,000 client names, phone numbers and other information.

The advisors deny the allegations, asserting they took no information and solicited no clients.

In a lawsuit filed in the U.S. District Court in New York, Edward Jones is asking a judge for a temporary restraining order to prohibit the advisors from soliciting the firm’s clients. Edward Jones is also requesting damages. In response, the advisors assert that “there was (and is) no emergency, no credible claim of irreparable harm, and no likelihood of success on the merits.”

The dispute mirrors similar lawsuits filed by brokerage firms this year. Firms have become more aggressive in protecting what they see as their clients, according to attorneys who represent advisors in litigation.

The number of such lawsuits has risen since Morgan Stanley left the Broker Protocol, an industrywide agreement that permitted advisors switching firms to take basic client contact information with them. Morgan Stanley has sued several advisors this year, and is currently engaged in litigation with a team that moved to Stifel in September.

Jim Eccleston, an attorney not affiliated with this case, has seen “increased angst among financial advisors considering a transition.” He and his partner Stephany McLaughlin have stepped up their efforts to prep advisors for career moves.

“Federal court filings show that year-over-year, Edward Jones and Morgan Stanley substantially have increased their court filings against transitioning financial advisors, with UBS filing an equal, but large, number of lawsuits year over year. Clearly, Morgan Stanley and UBS are putting their court filings where their mouths are — having exited the Protocol for Broker Recruiting and wishing to send a message to their advisor ranks,” Ecceleston said.

While Edward Jones is not a member of the protocol, its use of litigation against departing brokers comes as the St. Louis-based firm steps up its own efforts to recruit experienced talent away from its rivals.

Feaser and Eisenbraun’s response to their former employer’s lawsuit hits upon this point. Edward Jones “encourages the advisors it hires to take customer lists and solicit clients upon transfer. This is the conduct in which plaintiff now falsely accuses defendants of engaging, and that plaintiff seeks to enjoin.”

A spokesman for Edward Jones says the company pursues legal action against former financial advisors it believes to have violated their employment agreements. “In this case, we believe the individuals involved both took confidential client information and solicited Edward Jones clients to move their business elsewhere.”

In its lawsuit, Edward Jones claims Feaser and Eisenbraun “secretly” made copies of client files and confidential records and took these with them when they left the company on Nov. 2 to open a new practice with Ameriprise on Staten Island, New York.

The firm says that Feaser printed a list on Sept. 25 described as “All Clients for Debra.” Just over 1,000 names were on that list which included information such as “primary phone number, call preference, account number, address and acceleration code,” according to Edward Jones’ lawsuit. The following day, Eisenbraun printed a similar list of 66 clients, the firm says.

Edward Jones also claims that Feaser and Eisenbraun have since been soliciting clients in violation of their contracts, posing a direct threat to the firm’s unique business model of operating one-advisor branch offices, almost all of which are located in small towns or suburbs. Edward Jones has more than 14,000 brokers in the U.S.

“The successful operation of Edward Jones’ offices in these markets, dealing almost exclusively with individual investors, is the result of many years of effort, research, promotion, advertising, time, expense, marketing and good will expended by Edward Jones,” the firm says in its lawsuit.

Feaser and Eisenbraun’s actions “have damaged the financial viability of the Edward Jones’ Staten Island, New York office because they have solicited Edward Jones’ clients representing a significant amount of assets, as well as caused noncompensable damages to Edward Jones’ business reputation and the goodwill it has developed at great effort and expense over the years,” the firm claims.

Feaser and Eisenbraun deny that they’ve solicited any clients. In their legal response, the advisors contend that they merely notified clients of their departure from Edward Jones. “The case law is clear that merely ‘announcing’ new employment is not solicitation.”

They found contact information for these clients through public records, and took no client lists when they cut ties with Edward Jones, the advisors say. Edward Jones “has utterly failed to offer any specific actions by defendants that constitute misappropriation.”

Feaser, an advisor of 24 years, had been with the company since 2003, according to FINRA BrokerCheck records. Eisenbraun started his career at Edward Jones two years ago.

Neither the advisors nor their attorney were available for comment.

An Ameriprise spokeswoman confirmed that Faeser and Eisenbraun joined the firm’s employee channel but otherwise declined to comment.

The attorneys of Eccleston Law LLC represent investors and advisors nationwide in securities and employment matters. The securities lawyers at Eccleston Law also practice a variety of other areas of practice for financial investors and advisors including Securities FraudCompliance ProtectionBreach of Fiduciary DutyFINRA Matters, and much more. Our attorneys draw on a combined experience of nearly 65 years in delivering the highest quality legal services. If you are in need of legal services, contact us to schedule a one-on-one consultation today.

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Former Morgan Stanley Advisors File Lawsuit First in an Effort to Avoid Temporary Restraining Order and Injunction

From the Desk of Jim Eccleston at Eccleston Law LLC:

Morgan Stanley Building

Two San Diego advisors, who recently joined Hilltop Securities, have filed a lawsuit against their former firm, Morgan Stanley, in an attempt to avoid a temporary restraining order that their former firm may seek to prevent them from soliciting their former clients.

The lawsuit was initiated in response to several temporary restraining order lawsuits filed by the firm against other former advisors after Morgan Stanley left the Broker Protocol late last year. Morgan Stanley has argued that the lawsuits are necessary in order to protect client privacy, and the firm’s purported “trade secrets.”

The former advisors filed their own complaint in federal court in the Southern District of California requesting that the federal judge void the non-solicitation clauses in their employment contract. In their complaint, they argue that their employment contracts are “illegal,” “unconscionable” and at odds with California public policy.

In addition, the advisors note that they have had business relationships with many of their existing clients prior to their joining Morgan Stanley and that they have put significant time and effort in developing and growing their book of business.

The attorneys at Eccleston Law assist reps in transition, negotiate their transition agreements, file lawsuits, and defend reps when firms file lawsuits.

The attorneys of Eccleston Law LLC represent investors and advisors nationwide in securities and employment matters. The securities lawyers at Eccleston Law also practice a variety of other areas of practice for financial investors and advisors including Securities FraudCompliance ProtectionBreach of Fiduciary DutyFINRA Matters, and much more. Our attorneys draw on a combined experience of nearly 65 years in delivering the highest quality legal services. If you are in need of legal services, contact us to schedule a one-on-one consultation today.

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Hilliard Lyons Joins Broker Protocol Despite Recent Exists by Major Firms

From the Desk of Jim Eccleston at Eccleston Law LLC:

Business person writing

Despite the fact that several major firms have withdrawn from the Protocol, Louisville, Kentucky based firm, Hilliard Lyons has agreed to sign on to the Broker Protocol. Founded in 1854, Hilliard Lyons currently has 70 branch offices with 376 wealth advisors.

Over a decade ago, many firms, including Merrill Lynch, Morgan Stanley and UBS, agreed to follow the Protocol in an attempt to reduce litigation costs originated by efforts to prevent brokers from soliciting and doing business with their former customers. The Protocol allows brokers to take with them only customer names, addresses, phone numbers, emails and account titles when they transition to other firms.

However, in recent years, the Protocol has not served a useful purpose for wirehouses because more than 1,600 smaller and independent broker-dealers and registered investment advisory firms have become signatories, thereby allowing them to recruit from the bigger firms without fear of litigation.

Nevertheless, Raymond James, Merrill Lynch and Wells Fargo have said that they will remain in the protocol for now, asserting that it was beneficial for both advisors and their clients.

The attorneys at Eccleston Law assist financial advisors in their employment transitions, negotiate their transition agreements (including employment agreements and forgivable loans), and defend reps in arbitration and litigation whether or not their firms are members of the Protocol.

The attorneys of Eccleston Law LLC represent investors and advisors nationwide in securities and employment matters. The securities lawyers at Eccleston Law also practice a variety of other areas of practice for financial investors and advisors including Securities FraudCompliance ProtectionBreach of Fiduciary DutyFINRA Matters, and much more. Our attorneys draw on a combined experience of nearly 65 years in delivering the highest quality legal services. If you are in need of legal services, contact us to schedule a one-on-one consultation today.

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FINRA Rule 2273: A Friend to Transitioning Reps- Part 1

From the Desk of Jim Eccleston at Eccleston Law LLC:

Financial advisors transitioning to a new firm often contact their customers in order to retain their business.

FINRA Rule 2273 requires recruiting firms to provide registered representatives with educational communication materials that highlight key considerations for their customers to consider in deciding whether to transfer their assets to the new firm.

This is the first in a series of posts to guide brokers through the frequently asked questions regarding FIRNA Rule 2273.

Frequently Asked Question #1: Does Rule 2273 apply if the registered representative was hired by the recruiting firm prior to the effective date of the rule (November 11, 2016)?

According to FINRA, Rule 2273 applies only if the registered representative was hired by or associated with the recruiting firm on or after the effective date of the rule. Therefore, if a registered representative was hired before November 11, 2016, communications between former customers and the representative are not subject to the requirements of Rule 2273.

Frequently Asked Question #2: Does Rule 2273 allow member firms to alter the format of the educational communication while retaining the substance of the communication?

According to FINRA, member firms are not allowed to alter the format of the educational communications. FINRA has developed a standardized communication with a FINRA logo and member firms are required to follow the requirements of the form.

The attorneys of Eccleston Law LLC represent investors and advisors nationwide in securities and employment matters. The securities lawyers at Eccleston Law also practice a variety of other areas of practice for financial advisors including Broker Litigation & ArbitrationStrategic Consulting ServicesRegulatory  MattersTransition Contract Review, and much more. Our attorneys draw on a combined experience of nearly 65 years in delivering the highest quality legal services. If you are in need of legal services, contact us to schedule a one-on-one consultation today.

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Protocol for Broker Recruiting

The principal goal of the following protocol is to further the clients’ interests of privacy and freedom of choice in connection with the movement of their Registered Representatives (“RRs”) between firms. If departing RRs and then new firm follow this protocol, neither the departing RR nor the firm that he or she joins would have any monetary or other liability to the firm that the RR left by reason of the RR taking the information identified below or the solicitation of the clients serviced by the RR at his or her prior firm, provided, however, that this protocol does not bar or otherwise affect the ability of the prior firm to bring an action against the new firm for “raiding”.

The signatories to this protocol agree to implement and adhere to it in good faith. When RRs move from one firm to another and both firms are signatories to this protocol, they make take only the following account information: client name, address, phone number, email address, and account title of the clients that they serviced while at the firm (“the Client Information”) and are prohibited from taking any other documents or information. Resignations will be in writing delivered to local branch management and shall include a copy of the Client Information that the RR is taking with him or her. The RR list delivered to the branch also shall include the account numbers for the clients serviced by the RR. The local branch management will send the information to the firm’s back office. In the event that the firm does not agree with the RR’s list of clients, the RR will nonetheless be deemed in compliance with this protocol so long as the RR exercised good faith in assembling the list and substantially complied with the requirement that only Client Information related to clients he or she serviced while at the firm be taken with him or her.

To ensure compliance with GLB and SEC Regulation SP, the new firm will limit the use of the Client Information to solicitation by the RR of his or her former clients and will not permit the use of the Client Information by any other RR or for any other purpose. If a former clients indicates to the new firm that he/she would like the prior firm to provide account number(s) and or/account information to the new firm, the former client will be asked to sign a standardized form authorizing the release of the account number(s) and/or account information to the new firm before any such account number(s) or account information are provided. The prior firm will forward to the new firm the client’s account number(s) and/or most recent account statement(s) or information concerning the account’s current positions within one business day, if possible, but, in any event, within two business days, of its receipt of the signed authorization.

This information will be transmitted electronically or by fax, and the request will be processed by the central back office rather than the branch where the RR was employed. A client who wants to transfer her/her account need only sign an ACAT form. RRs that comply with this protocol would be free to solicit customers that they serviced while at their former firms, but only after they have joined their new firms. A firm would continue to be free to enforce whatever contractual, statutory or common law restrictions exist on the solicitation of customers to move their accounts by a departing RR before he or she has left the firm. www.ffec.com | Member FINRA, SIPC The RR’s former firm is required to preserve the documents associated with each account as required by SEC regulations or firm record retention requirements. It shall not be a violation of this protocol for an RR, prior to his or her resignation, to provide another firm with information related to the RR’s business, other than account statements, so long as that information does not reveal client identity. Accounts subject to a services agreement for stock benefits managements services between the firm and the company sponsoring the stock benefit plan that the account holder participates in (such as with stock option programs) would still be subject to (a) the provisions of that agreement as well as to (b) the provisions of any account servicing agreement between the RR and the firm. Also, accounts subject to a participation agreement in connection with prospecting IRA rollover business would still be subject to the provisions of that agreement.

If an RR is a member of a team or partnership, and where the entire team/partnership does not move together to another firm, the terms of the team/partnership agreement will govern for which clients the departing team member or partners may take Client Information and which clients the departing team member or partners can solicit. In no event, however, shall a team/partnership agreement be construed or enforced to preclude an RR from taking the Client Information for those clients whom he or she introduced to the team or partnership or from soliciting such clients. In the absence of a team or partnership written agreement on this point, the following terms shall govern where the entire team is not moving. (1) If the departing team member or partner has been a member of the team or partnership in a producing capacity for four years or more, the departing team member or partner may take the Client Information for all clients serviced by the team or partnership and may solicit those clients to move their accounts to the new firm without fear of litigation from the RR’s former firm with respect to such information and solicitations, (2) If the departing team member or partner has been a member of the team or partnership in a producing capacity for less than four years, the departing team member or partner will be free from litigation from the RR’s former firm with respect to client solicitations and the Client Information only for those clients that he or she introduced to the team or partnership.

If accounts serviced by the departing RR were transferred to the departing RR pursuant to a retirement program that pays a retiring RR trailing commissions on the account in return for certain assistance provided by the retiring RR prior to his or her retirement in transitioning the accounts to the departing RR, the departing RR’s ability to take Client Information related to those accounts and the departing RR’s right to solicit those accounts shall be governed by the terms of the contract between the retiring RR, the departing RR, and the firm with which both were affiliated. A signatory to this protocol may withdraw from the protocol at any time and shall endeavor to provide 10 days’ prior written notice of its withdrawal to all other signatories hereto. A signatory who has withdrawn from the protocol shall cease to be bound by the protocol and the protocol shall be of no further force or effect with respect to the signatory. The protocol will remain in full force and effect with respect to those signatories who have not withdrawn.

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HighTower Grabs a $1 Billion Wells Fargo Team

From the desk of James Eccleston at Eccleston Law, LLC:

wells-fargo

A $1 billion team has left Wells Fargo to go independent with HighTower. After leaving Wells Fargo, the team of recruits formed Fortress Wealth Planning in Jacksonville, Florida.

In all, HighTower picked up a combination of 14 teams and tuck-ins in 2016.  HighTower attributes its grown to its fiduciary mindset and open-source, multi-custodial approach. In addition, there has been an overall industry-trend which demonstrates that independence remains a popular option for advisors. HighTower now has over 190 advisors operating from offices in 26 states.

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Current SII Investments Recruitment Deal

From the desk of James Eccleston at Eccleston Law, LLC:

investment-losses

SII Investments has marketed a recruitment deal to financial advisors which consists of an upfront cash payment between 5% to 30%. Additionally, there is a Year 1 payout bonus of 5% to 10% and a Year 2 payout bonus of 5% to 10%.

All proposed deals are negotiable and reflected in numerous agreements such as promissory note and employment agreements. Reps should retain qualified legal counsel to review those documents in advance of committing to transition to a new firm.

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