Non Compete Agreements For Financial Advisors

This is part of the risk and compromise that could be frustrating for an advisor whether you have an employment contract with a non-compete clause or a non-recall. But from the company`s point of view, they take a lot of risks and bear the cost of taking that risk for you. So even if you receive the customer, you did it with your brand, resources, support and operations. In some cases, it`s even their leads in the first place. On the other hand, an inaccessibility agreement allows a broker to work for a competitor, but not to call on clients of his former company. On the surface, this serves the public interest: the broker can compete and the company can protect its trade secrets. But in reality, a broker, who can`t ask for his book built for many years, is practically out of business. It might simply say that you can still be a financial advisor, but not for a competing company within 20 miles of your current business. Or you can still be a financial advisor, but not compete with them neck-and-neck in the local market.

Or the non-compete clause could mean that you can still be a financial advisor, but not in the specific niche of that company. Or it might say that you can be a financial advisor, but you can`t compete with the company for existing customers who are already in the business. Just go out and do something completely new and something else. I recently decided to leave the RIA, which I was working on, after it became clear that the promised succession plan would never happen, which I understood after hearing your podcast «Financial Advisers Success» with David Grau a few months ago. I always had a very clear customer book that I order within the company, but the company made me sign a non-competition in an employment contract when I joined, where I agreed not to provide financial advice to the company`s customers for a year, even though I had a specific list of clients to contact a week after I left. But when I left the company within two days, they contacted all my clients with a letter telling them that they would be assigned to another company advisor, because they assured that the company could still serve them. At that time, one of my former clients alerted me to the letter, so I contacted some of them to explain the situation and what actually happened. I didn`t leave the industry, I just left the company. And then, again, the company hit me with a stop letter and blow and five days later I was served a lawsuit for non-competition violation.

What should I do? In practice, I think non-acceptance agreements are less common in RIA cases. Like a broad, non-competitive agreement, it is not clear how applicable they actually are to the courts when challenged. You know, it`s one thing when an employment contract says you don`t compete with a company and you don`t recruit existing customers from the company, but it`s another thing to say to its customers, «Hey, although you want to work with this new company and not with the old one, the new company shouldn`t work with you because they were part of the old company.» Judges do not necessarily tell consumers what their businesses are and with whom they are not allowed to do business. The first type of restrictive confederation in an employment contract is a «non-compete».