Eccleston Law LLC

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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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:

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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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Current Steward Partners Recruitment Deal

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

Business People. Successful Business Partner Shaking Hands in the office. Business Team

Steward Partners has marketed a recruitment deal to financial advisors which consists of an upfront cash payment up to 100% cash and up to 100% in equity. In addition, a succession plan deal may provide for less in cash plus equity and books/practices under $1M for candidates looking to retire. Lastly, premiums still are offered an additional 25% in equity for first adopters in new markets (100% cash plus up to 125% equity).
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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Current Summit Financial Recruitment Deal

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

eccleston-law-offices-ar

Summit Financial has marketed a recruitment deal to financial advisors which consists of an upfront cash payment between 5% to 25%. Additionally, there is a year 1 payout bonus of 5% to 15% and a year 2 payout bonus of 5% to 15%.
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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Current Waddell and Reed Recruitment Deal

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

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Waddell and Reed has marketed a recruitment deal to financial advisors which consists of an upfront cash payment between 5% to 50%. Additionally, there is a year one Asset Transfer payment (forgivable loan):  5% to 50%.

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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Current Wells Fargo Finet Recruitment Deal

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

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Wells Fargo Finet has marketed a recruitment deal to financial advisors which consists of an upfront cash payment between 25% to 75%. Additionally, the hurdle in order to meet back-end production goals under the deal is:

·         Year 1: Hurdle – 75% of revenue                                            Payout bonus: 0% to 50%

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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Current RBC Recruitment Deal

From the desk of James Eccleston at Eccleston Law, LLC:rbc_place_ville-marie

RBC has marketed a recruitment deal to financial advisors which consists of an upfront cash payment between 100% to 140%. Additionally, the hurdles in order to meet back-end production goals under the deal are:

·         Year 1: Hurdle – 50% of assets and revenue

Payout bonus: 30% of production

·         Year 2: Hurdle – 85% of assets and revenue

Payout bonus: 25% of production

·         Year 3: Hurdle – 100% of revenue

Payout bonus: 25% of production

·         Year 4: Hurdle – 115% of revenue

Payout bonus: 25% of production

·         Year 5: Hurdle – 125% of revenue

Payout bonus: 15% of production

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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