Advisor with over half of RIA's AUM sued after moving to LPL

An RIA at risk of seeing more than half of its assets under management walk out the door is suing a former advisor who resigned two months ago to join LPL Financial.

Canter Strategic Wealth Management sued its former advisor, Michael N. Bernier, along with LPL in federal court on Monday in a suit alleging the two defendants had conspired to steal clients. Canter Strategic Wealth, a subsidiary of Canter Companies, is a registered investment advisor in La Jolla, California, with roughly $300 million under management and 12 employees, according to a Form ADV filed in June. In a press release from November announcing Bernier's recruitment from Canter, LPL said Berniers had been managing roughly $165 million at his former firm.  

In its suit filed in federal district court in southern California, Canter said Bernier suddenly resigned on Oct. 23 after being at the firm for more than five years. The same day, according to the suit, he became registered with LPL's office in San Diego.

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Bernier, who now runs a practice called GWC Financial Advisors, is accused by Canter of downloading confidential client information onto his laptop and then deleting files and taking other steps to erase evidence of other misdeeds. Canter alleged Bernier became particularly active in client accounts in the days leading up to his resignation.

On Oct. 22, for instance, he accessed client reports, tax analyses and account information at a remarkably high rate — more than twice as frequently as his average for any single day in the preceding months, according to the suit. Many of the clients Bernier worked with at Canter have since moved to LPL, the suit alleges.

"On just a single day in early November, Canter suffered a loss of more (than) $20 million in AUM that was transferred away by clients who were previously serviced by Bernier," Canter said.

Neither Canter, LPL nor Bernier responded to requests for comment. In a disclosure on the Security and Exchange Commission's Investment Adviser Public Disclosure database, Canter repeats many of its allegations about Bernier's resignation.

Bernier responded in his note by denying that any violations had occurred and that Canter had no factual basis for its investigation.

"During the year prior to my resignation, Canter replaced my work computer due to technical problems," Bernier wrote. "I requested permission to download personal files to a USB drive. After Canter granted permission, I downloaded personal files and deleted those files from the work computer. I suggested that Canter review the USB contents, which Canter declined."

Besides misappropriating confidential information, Bernier is also accused of violating a contract clause barring him from soliciting former clients for a year should he leave Canter. He also, according to the suit, was under an obligation to give Canter the option of buying out part of his book of business should he choose to resign.

Canter said it sent Bernier a letter on Nov. 1 demanding he return any confidential client information and sent LPL Financial a letter the same day warning of its concerns over Bernier's departure. Canter contends that LPL declined to help return any allegedly stolen data and instead continued to help Bernier move clients over.

The suit accuses Bernier and LPL of violations including misappropriation of trade secrets, breach of contract, tortious interference in contract and prospective economic relations, and conspiracy. It also alleges Bernier breached his fiduciary duty of loyalty.

The suit seeks preliminary and permanent injunctions compelling Bernier to return any confidential information he may have taken and to repay any money he might have made by soliciting his former clients to LPL. Canter is also asking for compensatory and punitive damages, and compensation for its legal fees.

An aggressive recruiter with more than 23,000 advisors at the end of the third quarter, LPL frequently finds itself the subject of lawsuits questioning the methods it uses to pull advisors over from competitors. LPL was sued in July by Ameriprise, a rival firm with more than 10,000 advisors, over allegations that it had illegally used a spreadsheet system to enable recruited advisors upload confidential data from their former clients. The two litigants agreed earlier this month to bring in a third-party firm to preserve evidence in the dispute pending a resolution before a Financial Industry Regulatory Authority arbitration panel.

Ameriprise and LPL have also gone head to head over individual recruiting deals. In October, for instance, Ameriprise won a temporary restraining order barring LPL and a recently recruited advisor, Douglas Kenoyer, from reaching out to Kenoyer's former clients at Ameriprise. That case is also headed for resolution before a FINRA arbitration panel.

In going to LPL, Bernier chose to join the firm's Linsco unit, its channel for direct-employee advisors. Linsco was started in 2019 to give advisors who were eager to avoid working at a standard broker-dealer or wirehouse but did not want to go fully independent.

"The decision to move to LPL came after a great deal of due diligence," Bernier said in the release. "I believe LPL's comprehensive services and tools, along with its model of transparency and dedication to independence, allow me to give my clients guidance on what is most appropriate for them."