Financial advisors are by nature a social bunch, and their livelihood depends upon cultivating lasting relationships with clients and colleagues. But leaving a firm can rip those ties to shreds, as the legal odyssey of a former Edward Jones broker highlights.
The story of
"Unfortunately, it's a story that plays out all too often," said Brian Hamburger, a lawyer at industry legal firm The Hamburger Law Firm who specializes in helping financial advisors with career moves to other firms or to independence.
Clem had lined up a new job at competitor Ameriprise, but was fired by Edward Jones on Jan. 20 after coworkers reported his imminent departure to management and a compliance officer confronted him, according to a lawsuit filed by Edward Jones on Jan. 26 in an Illinois federal court. The lawsuit alleged that Clem stole valuable "trade secrets" and violated his employment contract by soliciting clients and other employees to leave with him, causing the firm "irreparable harm."
In court papers, Clem denied soliciting Edward Jones clients. He countered that he was betrayed by his former colleagues after working for years to organically build his book of business in the small town of Macomb, where he knocked on doors and sponsored numerous community events to build client relationships.
In its
"We are very pleased with the court's decision," an Ameriprise spokesperson said in an emailed statement. "Ameriprise continues to attract high-caliber advisors from across the industry who appreciate our strength, stability and steadfast focus and commitment to investing in capabilities that drive practice growth and client engagement."
A spokesperson for Edward Jones said in an email that "we take seriously our obligations to safeguard and protect our clients' information. We have terminated Clem's employment and continue to take appropriate steps to fulfill our commitments to clients. Our top priority remains serving our clients and helping them achieve financially what is most important to them."
Edward Jones did not respond to emails with further questions about the case. Clem and his legal team also did not respond to requests for comment.
'A story that plays out all too often'
Hamburger said the case would likely "settle out before we know." But certain events in the saga resonate with him as "unfortunately all too frequent" among the unlucky advisors and recruiters he sees.
"Many of these firms that are recruiting advisors are doing so with very cursory guidance," he said.
Hamburger will often hear advisors tell him they were put on a quick one-hour conference call with the lawyers at their new employer or told to simply fill out a spreadsheet or application form when it came to covering their compliance bases during a transition.
But many outgoing brokers could benefit from more personalized and comprehensive assistance by engaging an objective outside counsel who has their own best interests at stake, Hamburger said.
Hamburger added that once every couple of weeks, he gets a call from a firm or individual with what he called a "misfire" — the mistaken notion that jumping ship to a competitor would be easy. "This is often the single most significant move of their career. And yet it's often planned for in a woefully inadequate manner."
In response to questions about how well it prepares incoming brokers from a compliance standpoint, an Ameriprise spokesperson said in an email that the firm has "had thousands of advisors join us over the past decade who've felt well supported at all levels of their transition."
In court documents, Clem admitted to planning to leave for Ameriprise while still employed at Edward Jones and to "entering basic client contact information" into a transition software that Ameriprise had provided on his laptop. But he said that after he left, he didn't access that software and instead relied only on publicly available information to contact his clients.
His lawyers wrote that while his Edward Jones employment agreement referenced basic client contact details as "trade secrets," they weren't anything of the sort, since they were publicly available. Clem's lawyers said their client had merely contacted former clients to inform them of his new employment change, in line with industry regulations on broker behavior. They added that Edward Jones had, in recent cases defending new brokers who joined from competitors, invoked brokers' rights to bring over basic client contact information.
"Communications announcing new employment do not constitute improper solicitation. FINRA Rules vigorously protect the rights of customers to make a fully informed decision when an advisor such as Mr. Clem switches firms," lawyers for Clem said in court documents.
'Lies and rumors'
Clem also faced turmoil with former colleagues.
He accused them of turning on him "at the last minute," although "each of them insisted and planned all along" that they would join him at Ameriprise — a claim the colleagues denied in court papers. He also alleged that they disclosed his plans to Edward Jones "well-ahead of any planned and eventual start-date with Ameriprise," which had been set for Feb. 24, "leaving them ample opportunity to connect with and retain the clients that I have serviced for years." Following his termination on a Friday, Clem began his job at Ameriprise on Jan. 24, the following Tuesday, according to his
Clem also alleged that Edward Jones employees then spread lies and rumors, telling clients that he had been led out of the office in handcuffs or escorted by federal agents. He asserted that the brokerage violated FINRA rules in obstructing former clients' attempts to reach him after he left. "It is my duty and the industry standard … to inform my clients of my new employment and contact information … the public interest is best served by allowing the clients free access to the advisor of their choice," he said in court papers.
Advisors like to turn moves into a group event, seeking the familiar presence of their peers in the office — but that can be a double-edged sword, Hamburger said.
"You always have to be thinking, as an advisor: What burdens am I placing upon my colleagues in giving them this information?"
If colleagues are inclined to stay put after learning of an advisor's plan to move, "they can't safely stay and later be found out to have known this information without sharing it with the firm," he said. Even if well-intentioned co-workers are interested in joining, they may not align with the broker's vision of the new practice they would set up.
In Clem's case, "it would have been far better off if each party was making an overt move to retain legal counsel and actually show that they were committed," Hamburger said. "Here, you have a lot of he-said, she-said. In terms of whether or not the other folks were inclined to move, planning to move, committed to move, we don't know."
Lies and rumors about an outgoing broker are also sadly "very normal," Hamburger said. "Both parties often think that they're right."
But while leaving is hard, it can also be rewarding. "This is something where, as an advisor, you need to be so determined in your convictions. And you have to live through this transition in a very lonely state, until it's time for the big reveal."
