As a financial advisor, it is important to recognize these agreements and understand the legally binding fine print before signing a contract. Big winners in wealth management when Biden weakens non-compete rules David Grau Jr., president and CEO of Succession Resource Group, a Lake Oswego, Oregon-based firm that helps individual advisors assess equity in their practices, says the changes could put pressure on consulting firms. If employees can more easily switch companies due to less restrictive employment clauses, «it will stifle the industry`s ability to evolve its business.» As a result, most owners will be reluctant to «expose their business book to additional risks» and «will be less interested in training the next generation of professionals. And we already have a succession planning crisis. Except the caveat is that sometimes it works, but not with your current business. And if you want to stay in the industry as a financial advisor, but don`t want to stay in your current business, do you need to understand what happens to clients you have a relationship with when you leave the company and are you allowed to take your clients with you? However, Diamond doubts that a major overhaul would allow advisors to freely take clients elsewhere. Lawyers, he predicts, would draft contracts differently and create new loopholes. While the changes to these clauses are likely to seem dramatic, their «impact on the industry will be minimal, with more minor changes at the periphery,» Diamond says. «Intelligent legal minds will protect the status quo. They would rewrite these agreements so that people would give up those rights. From the point of view of the financial advisor, this increase in RIA employment contracts with non-compete and non-solicitation obligations is a major challenge. Because that means if you build your career and a customer base with your business and decide to leave, you`ll probably have to start from scratch and leave all your customers behind.

For some consultants, this may not seem «fair,» especially if the consultant really did the job to get the client. Lawyers representing consultants often use the same «freedom of choice» argument when arguing that a non-compete obligation should not be enforced. Consulting firms, especially larger ones, are often aware of these differences between states and regularly draft choice of location or «choice of law» provisions in their employment contracts, which stipulate that all disputes arising from the agreement are subject to the law in an arena of their choice. It could simply say that you can still be a financial advisor, but not for a competing business within 20 miles of your current business. Or you can still be a financial advisor, but not compete with them one-on-one in the local market. Or the non-compete clause might say you can still be a financial advisor, but not in that company`s particular niche. Or it could say you can be a financial advisor, but you can`t compete with the company for existing clients who are already with the company. You just have to go out and do something completely new and different. Non-compete obligations are similar in that these agreements prevent licensed financial advisors or those who voluntarily leave the company from taking advantage of customer lists, trade secrets, data and other benefits gained by working for the original employer. These agreements are written to prevent an advisor from competing with another financial advisory firm within a certain number of kilometres of his or her home firm. These agreements are not as prevalent as non-solicitation, but they can still be enforced in court.

Always seek legal advice on specific issues regarding your non-compete obligation. A change would have a huge impact on RIAs and consultants with the most lucrative and lucrative clients, Diamond says. They would be more in demand without these restrictions. Janene Marasciullo is a member of the firm`s Employment, Labor and Workforce Management and Commercial Litigation practice in the New York office of Epstein Becker Green. Ms. Marasciullo has extensive experience as a senior president in complex commercial, fraud, regulatory and labour litigation, with a focus on litigation in the financial sector. In addition, she represents businesses and individuals in government investigations and grand jury investigations. If you`ve already signed a contract with a company, that doesn`t mean you don`t have options. Many consultants have been able to change companies and have had success with new suppliers. Depending on the language of your contract, there may be opportunities to continue working with your clients while following the language of the agreement. While legal advice is an important step, Bridgemark`s advisors are also there to help you determine the next course of action if you`re not satisfied with your firm. At the first hearing on the plaintiff`s application for an interim injunction, the court did not determine on the merits whether the non-compete or non-solicitation obligation was enforceable.

However, the court ruled that consultants – regardless of a non-compete clause or solicitation – had the right to communicate or «announce» their change of employment to all their clients. The court also ordered the plaintiff to send a letter containing the same information to all of the defendant`s customers who had not been contacted before. Similarly, the court ordered the plaintiff to inform all customers who called by phone for the defendants of the new employment and the defendant`s contact information. The court took these steps to protect public clients who had no interest in the dispute and who could easily be harmed without easy access to their preferred advisor. In this week`s #OfficeHours with @MichaelKitces, my Tuesday 13 p.m EST show on Periscope, we discuss the dynamics of non-compete clauses, non-poaching and non-acceptance agreements for financial advisors working for an RIA, including the ease/difficulty of their enforcement and whether the non-competition clauses and non-poaching provisions are «fair». Financial advisors have a fiduciary duty to notify clients of a change of employment, but they must ensure that any notice does not turn into solicitation, as non-solicitation provisions are enforceable. Several sources contacted by RIA Intel recommend a wait-and-see approach. Louis Diamond, executive vice president at Diamond Consultants, a Morristown, New Jersey-based recruitment and consulting firm specializing in the financial sector, says it`s difficult to predict the impact of potential changes in financial employment contracts because «the devil is in the details.» In July, the Biden administration issued an order that included 72 upcoming initiatives to ban or restrict «non-compete obligations and unnecessary and burdensome professional licensing requirements that impede economic mobility.» While this executive order does not apply directly to the investment industry and will not affect the courts` interpretation of state laws as they apply to restrictive agreements, it has established clear anti-competitive sentiment at the federal level. .