Being fired from your firm of 15 years for a violation of company policy and losing access to your $150 million book of business.
Becoming the target of an intimidation and smear campaign crafted to drive you out of the industry, and your community, nine months later as you work to establish your new firm a half-mile away.
Battling former colleagues in court for six years in an effort to put the broken pieces of your career back together.
The case involving former Edward Jones broker Dalas Gundersen represents a nightmare scenario for any financial advisor parting ways with their firm.
The pain of the plot was amplified as Gundersen, focused on growing his new firm, was compelled to answer every call and text that came in. He was prohibited from reaching out to his old clients, and the only thing he retained in the split was his cell number. But the Northern California husband and father had no way of knowing if the relentless notifications were signs of legitimate business, or graphic responses to the impostor sex ads posted under his name.
The ads started appearing online in September 2015. In September 2021, a jury awarded Gundersen $30 million in damages for defamation from Edward Jones, and another $8 million in damages from the former colleague who carried out the Craigslist scheme.
Gundersen’s journey has reached a court-ordered resolution. And while his situation does not represent the norm when breaking up with or being dumped by your firm, it serves as a cautionary tale for the growing number of advisors preparing for a new beginning.
Plan ahead, and stick to the plan
Scott Matasar, a partner at the
He also expects that pace to persist as more advisors re-evaluate their situations, and bear witness to peers who have successfully broken away.
“I think COVID has had an effect in a couple of ways. First of all, it’s just easier for recruiters to get a hold of candidates because they're all working from home. They're not in the office and they don't have to sneak around,” he said. “But secondly, it's caused people to ask themselves … Do I really want to stay in the environment? I don't have an office. I don't have administrative support. I'm not getting any of the benefits that all my production supports because I'm sitting at home working in my fuzzy slippers. Why am I giving my firm 60% of my production?”
But firms are also weighing the benefits of cutting ties, contributing to the transition uptick. In the past year, Matasar said he has seen more examples of advisors being let go for minor transgressions that would have merited nothing more than a verbal warning previously.
“It could be simple math because if the branch has $500 million in assets under management and 20 advisors, if you find an excuse to reduce that to 18 advisors, you've now reduced the headcount by 10% at the same AUM, and that's the surest way for the branch manager to sort of boost statistics internally and protect their turf,” he said. “So I've seen advisors getting fired for foolishness.”
That’s one of the many reasons Matasar advises any finance professional considering a move or anticipating a termination to retain counsel early, and consult with them often. Having a solid legal plan and sticking to it can make the battle for clients less of a fight, and keep you out of court.
“I have a litigation rate of about 2%, so if I'm doing about 300 transitions a year, only five or six clients end up getting sued by their old firm in order to slow the advisor down, or slow down the transfer of clients,” he said. “There's no substitute for getting an early start. Ideally, I'd like to start working with clients 60 to 90 days out from their anticipated transition date. There are a number of things that we can do to position the client for success to retain more of their customers and also to minimize litigation risk where we are being deliberate and thoughtful. But frankly, there’s not a lot I can do if an advisor calls me and says to me, ‘I'm resigning a week from today.’”
When a clean break gets dirty
Dennis Nolte, a
Despite his planning, Nolte's exit from the credit union was followed by a lawsuit three weeks later. The credit union was coming after him for retaining contact information for client relationships he established as an independent contractor. Upon becoming an employee, Nolte was barred from soliciting any clients gained directly through the company.
“The interesting thing was when I left, I had heard they were going to make that difficult because there were others considering leaving and they wanted to make me an example,” he said. “They got a temporary restraining order and served me at home.”
With a looming lawsuit, Nolte’s new, smaller firm with more limited resources decided to put a hold on his onboarding.
“There was no business. We ended up having to go to court, and because my previous firm couldn't produce the original contract that had the nonsolicitation line in, the judge said, ‘Well, I guess the clients can do what they want,’” he said. “It was literally about a week to a week-and-a-half later. My old firm must have been surprised by that verdict, and that's when they looked harder for the old contract and found it.”
With the old contract in hand and the nonsolicitation language in black and white, Nolte’s old firm and new firm decided that mediation was the next step. He recalls being sued for roughly $6 million, and the situation eventually being settled for about $60,000 two years later.
“It took a long time to meditate, but after the [temporary restraining order] was thrown out, the new firm immediately started submitting all of the transfer information. About 60% to 70% of my clients had transferred over, and at that point it was too late to bring those people back,” he said. “So the firm that I left also started doing seminars for all of my clients, their clients, our joint clients if you will. They were bringing in their research people for a dog-and-pony show, and did it over at a really swanky hotel with great food and all of this stuff to try and get people to stay. So they weren't doing anything nefarious. They weren't doing anything like saying I was a horrible human being or besmirching me. But it was an interesting process.”
The lawsuit did take its toll, Notle said. Fault aside, just learning that an advisor is being taken to court for any reason can turn clients off. Nolte was able to maintain the trust he established with his book by building real relationships over time.
“With some of these folks, we've been through 2008. I met a lot of them right after the dot-com bubble, so we've been through some stuff together,” he said. “Reselling people on the idea of how great a human being you are and the wonderful service you provide sometimes is a little more difficult. It really is a test of the relationship, and sometimes that test is failed.”
When asked if his old firm’s attempts to deter others from leaving by making an example of him was successful, Nolte can’t point to facts or figures, but he assumes it is viewed as a worthy time investment.
“Nobody else left. I’ll put it that way,” he said.
Don’t do it alone
For advisors on the move, among their best resources are the people they often compete with for business. Rob Sandrew, who oversees recruiting initiatives for
“You have every right as an advisor to kick the tires to the nth degree, and I would definitely tell advisors to talk to other advisors that have done that transition, as well as an advisor who's been there for a long time to get a sense of what the culture feels like, what the capabilities are and how to take advantage,” he said. “I've done this over 20 years and I've had a number of individuals come to me for some guidance along the way.”
Sandrew also stresses the importance of legal counsel and knowing the rules of engagement, especially when considering independence. When making such a move, the onus to protect an advisor's business falls squarely on the advisor’s shoulders.
“I think if you roll the tape back probably 10 years ago, I used to hear all the time that independence was a place that wirehouse advisors would go to die. Right now it's quite the opposite,” he said. “With the more successful advisors, their clients are there for them. They're not there because of the firm.”
He added that a wealth of information, advice and horror stories about what not to do has made the task of keeping clients more palatable for professionals who have never been in that position.
“The most successful advisors that transition — and when I say successful they have the highest retention rates — they have a very significant model around the relationship component of their business,” Sandrew said. “They are right there in front of their clients all the time and they've built a very strong rapport which I think is incredibly important. There's that real human element there and these advisors tend to have a pretty strong EQ.”
The more difficult part, he warns, is keeping your emotions in check. An advisor can do all of the right things, and still find themselves in the crosshairs of their old firm or former colleagues.
When that happens, find the high road and stick to it, experts recommend.
“Things get emotional and stress levels during the transition are always high. I always encourage an advisor to call me and have a conversation so we can channel that frustration,” Sandrew said. “There was a catalyst for the move and you're taking action to improve your situation, and that's what you should be focused on. You shouldn't be focused on baggage that's emotionally or mentally there because of what happened in the past. We see it all the time where advisors want to kind of take a little swipe at their manager on the way out, but to what gain?”
He said while he loved all of the previous firms he called home, starting Manhattan West has been a highlight of his career. Esparza urges advisors everywhere to not let the worst cases and “what ifs'' deter them from making a move.
“It was more about wanting to run to something than to run from something, and I haven't regretted it for a moment,” he said.
Esparza said planning is the best friend of any transitioning advisor. He chipped away at his vision for a year before launching the firm so they could start right away once he left.
But in your pursuit of individual success, continue to make serving your current firm your top priority, for both legal and reputational reasons.
“For the most part when folks leave it's inconsequential. But it's a small industry, it's a small world, so I think it's best that you leave on good terms and don't create any problems on the way out,” he said.
He also encourages advisors not to buckle to threats of retaliation or outright intimidation when the battle for clients begins. Focus instead on making sure you have honored the terms of your contract, and leave the posturing to the firm you’re leaving behind.
“Some (firms) will create an illusion that leaving there it's going to be problematic. The reality is they don't have a leg to stand on, but they'll kick up dust to create that illusion,” Esparza said. “So the advice I always give is from ‘
