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professional development
Walk away with your book
Advisors should read their contracts before making any moves, says Lisa Stam, employment, labour and con- tracts lawyer at SpringLaw in Toronto. “Go back and read what you signed up for,” she says. “Everything turns on that. The courts will defer to contracts.”
Advisors should look for details about who owns clients or how to identify who owns them. “You typically can bring your individual clients with you if you brought them in,” Stam says. “There’s an understanding at law that they’ve come to you as their advisor, not to the firm, necessarily.”
However, firms will often insist that they were the draw, she says.
As such, when you start at a new firm, “have a nice clean record” of your book, she says.
Billick says that, absent contract provisions, owner- ship of a book is fact-specific. For example, some firms guarantee the ownership of a book of business so long as obligations are met, such as repayment of a forgivable loan given to an advisor when recruited.
Billick says advisors should inform their new firms
of non-compete or non-solicit provisions with their previous firms, and should consider consulting with an employment lawyer to ensure they stay onside of their contracts. In most cases, the advisor will have to pay for counsel.
“The last thing somebody wants is to give ammunition to their ex-employer to go after them legally,” he says.
Even with a book firmly in hand, advisors should follow protocol as they leave. “The process of how you depart will still matter,” Stam says.
She suggests advisors communicate their move to the firm and clients in a way that corresponds with their con- tractual obligations.
Finally, make a classy exit, regardless of how you feel about your old shop, Stam says. While a graceful good- bye might have nothing to do with employment law or securities regulation, it helps maintain your reputation as a professional.
“Most people don’t remember how amazing you were for the first decade — or two or three — of your employment relationship,” Stam says. “It’s those final
Before switching firms, review your contract for compensation schedules, such as the timeline of a signing bonus or other benefit, or the vesting of company shares
moments when you’re leaving — that’s what people remember.”
Mahrt described his departure as leaving home: walk- ing away from a firm can feel like a solemn act and should be executed with care. “It was very important to me that whatever [my team] did was viewed as taking the high road — legally, and with the greatest respect for my for- mer institution,” he says.
In transition
Having a plan to implement immediately following the announcement to join a new firm will increase the odds of a successful move.
On the morning they announced their departure, Gotts and Sweeney sent out a letter to clients and started call- ing them. They had reached all clients within five to six
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Ideal recruits
While advisors conduct due diligence on potential firms, firms in turn size up advisors.
Stuart Raftus, president at Canaccord Genuity Wealth Management, says advisors must articulate a value proposition (holistic planning, for example) and
demonstrate its execution. The firm typically looks for advisors with at least $150 million in assets.
Noah Billick, general counsel and portfolio manager at Dorchester Wealth Management, considers recruits’ compliance. “We’ll turn away advisors for regu- latory reasons — because they have significant compliance issues in their past,” he says. Other reasons for rejection include lack of cultural fit and too few assets.
Free to fly
A court case from 2000 highlights the distinction between employees who owe a fiduciary relationship to their employer and those who don’t.
Employees deemed fiduciaries would have an “ele- vated responsibility” to the employer, says Lisa Stam, a
lawyer at SpringLaw in Toronto — holding positions of trust and decision- making for the firm, with access to information that would hurt the firm if used against it.
Where there’s no fiduciary relationship nor a contractual restrictive covenant, such as a non-compete clause, “it’s a free market,” Stam says. “You’re free to leave.”
Further, an employer would have to prove that any restrictions on employment after leaving the firm are reasonable. It’s against the public interest to interfere with someone’s ability to earn a livelihood, she says.