Whose Clients Are They? Edward Jones Sues Advisors

Pardon me! What a crock!

The idea that Edward Jones or any other Broker/Dealer “Owns” client accounts brought to them by an Independent Contractor is bunk. The advisors are not employees of the B/D. The advisor is the one who has the personal trust and rapport of the investor, who owns the assets.

Regarding the term “trade secrets” used by Edward Jones, among others, there are none. The client’s personal information was gathered by the advisor, initially. The advisor is required to maintain such information by FINRA and other regulations dealing with suitability and possibility fiduciary responsibility. In fact, if the advisor does not update such information every three years, he or she might face compliance issues.

Then there is the issue of the investors best interests. Is the investor better served by remaining with the old B/D or having the trusted advisor continue, uninterrupted, to act in the best interest of the client/investor? Should the client be forced to remain with the firm and have no advisor or an unknown advisor newly assigned.

The arbitrary position of the B/D is they should maintain ownership of the account as the servicing agent. FINRA seems to encourage the B/D firms to act in the firm’s best interest and not that of the client. The assumption is the account ‘belongs’ to the firm and not the advisor. Clearly, this presumption is not in the best interest of the investing public.

Edward Jones is suing two advisors who moved to Ameriprise for allegedly violating non-solicitation agreements, making this the latest case of a brokerage firm taking its former employees to court over client contacts.

At stake is the $150 million in combined assets that Edward Jones says the duo oversaw (an Ameriprise spokeswoman says they had $215 million). Edward Jones asserts that clients have already transferred more than $19 million to its rival Ameriprise.

Edward Jones claims advisors Debra Feaser and Michael Eisenbraun have taken confidential information, accusing them of printing out lists containing more than 1,000 client names, phone numbers and other information.

The advisors deny the allegations, asserting they took no information and solicited no clients.

In a lawsuit filed in the U.S. District Court in New York, Edward Jones is asking a judge for a temporary restraining order to prohibit the advisors from soliciting the firm’s clients. Edward Jones is also requesting damages. In response, the advisors assert that “there was (and is) no emergency, no credible claim of irreparable harm, and no likelihood of success on the merits.”

The dispute mirrors similar lawsuits filed by brokerage firms this year. Firms have become more aggressive in protecting what they see as their clients, according to attorneys who represent advisors in litigation.

 Federal court filings show that year-over-year, Edward Jones and Morgan Stanley substantially have increased their court filings against transitioning financial advisors, with UBS filing an equal, but large, number of lawsuits year over year. Clearly, Morgan Stanley and UBS are putting their court filings where their mouths are — having exited the Protocol for Broker Recruiting and wishing to send a message to their advisor ranks.

While Edward Jones is not a member of the protocol, its use of litigation against departing brokers comes as the St. Louis-based firm steps up its own efforts to recruit experienced talent away from its rivals.

Feaser and Eisenbraun’s response to their former employer’s lawsuit hits upon this point. Edward Jones “encourages the advisors it hires to take customer lists and solicit clients upon transfer. This is the conduct in which plaintiff now falsely accuses defendants of engaging, and that plaintiff seeks to enjoin.”

A spokesman for Edward Jones says the company pursues legal action against former financial advisors it believes to have violated their employment agreements. "In this case, we believe the individuals involved both took confidential client information and solicited Edward Jones clients to move their business elsewhere."

In its lawsuit, Edward Jones claims Feaser and Eisenbraun “secretly” made copies of client files and confidential records and took these with them when they left the company on Nov. 2 to open a new practice with Ameriprise on Staten Island, New York.

The firm says that Feaser printed a list on Sept. 25 described as “All Clients for Debra.” Just over 1,000 names were on that list which included information such as “primary phone number, call preference, account number, address and acceleration code,” according to Edward Jones’ lawsuit. The following day, Eisenbraun printed a similar list of 66 clients, the firm says.

Edward Jones also claims that Feaser and Eisenbraun have since been soliciting clients in violation of their contracts, posing a direct threat to the firm’s unique business model of operating one-advisor branch offices, almost all of which are located in small towns or suburbs. Edward Jones has more than 14,000 brokers in the U.S.

“The successful operation of Edward Jones’ offices in these markets, dealing almost exclusively with individual investors, is the result of many years of effort, research, promotion, advertising, time, expense, marketing and good will expended by Edward Jones,” the firm says in its lawsuit.

Feaser and Eisenbraun’s actions “have damaged the financial viability of the Edward Jones’ Staten Island, New York office because they have solicited Edward Jones’ clients representing a significant amount of assets, as well as caused noncompensable damages to Edward Jones’ business reputation and the goodwill it has developed at great effort and expense over the years,” the firm claims.

Feaser and Eisenbraun deny that they’ve solicited any clients. In their legal response, the advisors contend that they merely notified clients of their departure from Edward Jones. “The case law is clear that merely ‘announcing’ new employment is not solicitation.”