The Chance of Litigation During Financial Advisor Transition – Clip with Scott Matasar

Litigation Rate + High-Risk Categories

Unknown: I typically represent anywhere from 250 to 300 advisors or teams a year in moving from one firm to another uh and I’ve been doing this for a long time so uh it’s safe to say I’ve literally moved thousands of advisors between firms uh over time and what I can say you know at a high level Corey is that you know advisors are often nervous to move but what I my experience has been that in a given Year my litigation rate the number of advisors who actually get sued by their firm when they leave is about one or one and a half percent so if I’m doing 250 transitions a year I might get three or four uh you know advisors who get sued by their firm when they leave and it’s usually those people fall into a couple of high risk categories they’re they’re either leaving a bank Channel situation at JPMorgan 100 and a PNC or some small Regional Bank more likely where they’re you know with the Raymond James financial institutions division or Securities America but they’re working you know Podunk Bank of Nebraska um you know the banks get very fidgety about advisors leaving and hitting on their bank deposit first so that’s one high-risk category the second high-risk category are people leaving you know stand-alone small rias where the the owner is still there and thinks that everybody ought to be throwing rose petals on the floor every morning when he walks into the office and takes any it takes any departure as a personal insult um and have a lot of ego involved and will sue people out of a bruised ego and then the third category are people who don’t follow my advice and do something stupid um and basically put a Target on their backs to get sued but my clients who follow my advice um as I say the vast vast majority of them are able to move without any incident whatsoever so advisors should not be scared to move

Reaction + Why the Litigation Rate Feels Higher

Unknown: I think that’s really good to know and I think that is um an incredibly low statistic compared to what a particular Edward Jones advisor or a Morgan Stanley advisor or UBS you know advisor thinks I think there’s a lot of people potentially you know they have a lot of vested interest in them keeping in staying in their seats that you know would potentially tell them that that litigation rate is a lot higher

Best Practices + “Color Inside the Lines”

Unknown: well if you do it properly you don’t really give the firms an excuse to sue you right the trick is to make sure you color inside the lines and if you conduct yourself appropriately then the firm doesn’t have any basis to sue you um it might mean you know being careful with what you do and don’t do but if you do it properly you know my role in these in these transitions Corey is to advise uh you know FAS you know to be so that they can be as aggressive as possible without crossing any red lines that would give the firm an excuse to sue them and and there’s a lot of leeway there if you know where to look at a high level not just Jones but anywhere but you can there’s a lot you can do that you don’t realize as a as an advisor that you have have some tools available to you that don’t violate the contract and will still help you accomplish what you need to do in terms of giving your clients the opportunity to come with you

Wrap-up

Unknown: thank you