LPL Financial is firing back at its rival Ameriprise's wholesale legal indictment of its recruiting methods, calling an ongoing court challenge "a public relations stunt masquerading as a lawsuit."
LPL on Thursday filed a motion in federal court in San Diego opposing Ameriprise's previous request for a
In its reply on Thursday, LPL argues
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"For years, advisors have left Ameriprise to work with LPL because LPL offers a superior opportunity for these advisors to serve their customers," according to the suit. "Advisors' preference for LPL is not surprising: while LPL champions the independence of its advisors, Ameriprise gives it only lip service. Frustrated by its failure to compete in the market, Ameriprise has fired back, filing this suit and this motion as a means to issue press releases tarring LPL with false accusations of impropriety and simultaneously scare its advisors into staying put."
Ameriprise responded in part by saying, "LPL's conduct is unacceptable and abandons all reasonable notions of client privacy rights. It also subjects the advisors it recruits to regulatory, and in some cases, even criminal exposure by encouraging this type of behavior."
Beyond the broker protocol
LPL's filing on Thursday contends that independent broker-dealers generally have an understanding that client information belongs to advisors, not their affiliated firms. LPL says this assumption went unquestioned for years.
The first time it was seriously challenged, according to LPL, was in an arbitration claim Ameriprise filed in 2021 with the Financial Industry Regulatory Authority. Ameriprise then made the novel contention, according to LPL, that advisors moving from one independent broker-dealer to another could only take information flagged as protected by an industry-spanning pact known as
The protocol, which LPL and Ameriprise both belong to, specifies five types of information departing advisors are allowed to take with them: client names, addresses, phone numbers, e-mail addresses and account titles. LPL said Ameriprise had no objection for years to advisors going beyond the limits set out by the protocol.
So its change of stance in 2021 "came as a surprise to LPL and the advisors seeking to join it," according to the suit. LPL contends the protocol was really designed to offer legal harbor to advisors and teams that leave large Wall Street wirehouses to join an independent firm.
But among independent broker-dealers, LPL contends, the near-universal consensus has always been that the protocol was a "floor" laying out what departing advisors may take at a minimum rather than a "ceiling" setting an uppermost limit. Yet, despite this understanding, LPL has abided by the terms of the protocol when recruiting from Ameriprise in recent years, according to the suit.
Brian Hamburger, the chief counsel of the Hamburger Law Firm, said the dispute shows the industry is still struggling with the definition of what it
"Perhaps it's time these firms come to some type of alignment on the meaning of independence," Hamburger said. "They all want to think of themselves as independent broker-dealers, yet here we are arguing over the ability to move client information within this industry. So what really is so independent about them that they deserve that moniker?"
Phil Waxelbaum, an industry recruiter and the founder of Masada, said Ameriprise's insistence that departing advisors limit themselves to taking only information allowed under the broker protocol effectively negates the biggest benefits of independence. A book of business that's not easy to transfer to another firm is worth far less than one that can be moved with little impediment, he said.
"These advisors may have greater freedom over where they can have an office, how they can market themselves and the services they render," he said. "But they are not truly independent because they are being denied the ownership of the clients."
Ex-Ameriprise advisors speak out
LPL's response Thursday was accompanied by declarations from five recently recruited Ameriprise advisors who stated under oath that they abided by the terms of the broker protocol when they moved client information over. In a filing on Wednesday, for instance, the ex-Ameriprise advisor Mitchell McCann says he abided strictly by the terms of the protocol when he and his son Wesley
Ameriprise separately filed a suit in June against LPL and the McCanns, who had formerly managed nearly $250 million for Ameriprise out of an office in the Detroit suburb of Bloomfield Hills, Michigan. In that action, Ameriprise accused the farmer-son duo of making off with confidential client information "in the dark of night, after business hours, and on weekends."
McCann instead contends that any information he and his son took fell strictly within the limits of the broker protocol. He said roughly 80% of the clients he had at Ameriprise had come with him from his previous affiliation with Raymond James, where he was from 1999 to 2014.
McCann said many of his former clients started reaching out to him by email and on social media after learning he was leaving Ameriprise to join LPL. He said he scrupulously avoided responding until his industry licenses had been transferred to his new firm.
McCann said LPL never advised him on what sorts of information he could take with him. Ameriprise's recruiting dispute with McCann and his son makes much of security camera footage showing the pair removing boxes full of various items from their old office. McCann said in his declaration that nothing they took could be considered confidential client information.
"Rather, the boxes that I left the Ameriprise office with contained personal items only, i.e., photos and tchotchkes," according to McCann's statement.
The four other declarations submitted by former Ameriprise advisors similarly assert that any client information taken fell within the limits of the broker protocol.
Bulk upload tool
Ameriprise's lawsuit against LPL also called its rival out for its use of a "bulk upload tool" — essentially a Microsoft Excel spreadsheet making it easy to transfer client information. LPL said the system was used only to move data that Ameriprise had deemed in its own contracts as falling within the limits of what advisors could take with them.
But after LPL became aware of Ameriprise's objections to its recruiting methods in 2021, according to LPL's suit, it ceased using the bulk upload tool altogether with departing Ameriprise advisors.
"LPL requires advisors departing Ameriprise to comply with the broker protocol notwithstanding their contracts with Ameriprise," the suit says. "Former Ameriprise advisors must obtain customer information beyond that permitted by the Protocol from their customers directly, after their licenses have transferred to LPL."
LPL said it does not provide legal counsel to advisors who are thinking about moving to it from another firm. Instead, it recommends they talk to independent lawyers who can help them understand what sorts of client information they can take with them without fear of legal consequences.
Hamburger said he always recommends that advisors who are considering switching firms talk to their own lawyer.
"If they are following another firm's legal counsel without having that direct legal relationship, they are likely to get advice that's in the interest of the the firm they're joining and that's not aligned with their own interests," he said.
Why wait until now to sue?
LPL contends that Ameriprise can't obtain an injunction like the one it is seeking without showing that it's in danger of suffering irreparable and imminent harm. Any such claim in Ameriprise's case is "absurd on its face," LPL argues, because many of the recruiting deals Ameriprise is complaining about occurred years ago.
If those deals truly threatened "imminent harm," LPL contends, Ameriprise would have filed suit much sooner.
"Ameriprise has known since at least 2021 — if not earlier — that certain advisors retained customer information with them when they transitioned to other firms," according to the suit. "Ameriprise's failure to seek injunctive relief until now is alone fatal to its motion."
The suit argues that victory for Ameriprise would harm the public interest not merely by chilling advisors' ability to change firms.
"Ameriprise's requested relief would have the effect of preventing customers from working with the advisors they choose, if the advisor does leave Ameriprise," according to the suit. "Courts routinely hold that the public interest would be gravely harmed by an injunction that prevents a customer from working with their chosen financial advisor."
— This story has been updated with additional details and expert comments.
