Intro

Unknown: but if you do it properly you know my 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

Podcast Opening + Introductions

Corey: hey everyone thanks for joining today my name is Corey Whalen managing partner of bridgemark strategies uh independent recruiting firm that’s upped over a thousand financial advisors objectively explore the broker dealer and Ria Marketplace personally myself I’ve helped over a hundred Edward Jones advisors transitioned from one firm to another and in my opinion at Edward Jones financial advisors have more misconceptions about making a transition to Independence and a multitude of different ways than any other firm and with my experience in 10U plus years of recruiting I could help financial advisors debunk those misconceptions around the actual legit sticks of a transition the difference between broker dealers and rias and the things that you need to do in order to be successful to make a move over to the independent Channel but once it gets to reviewing in Edward Jones wiggle agreement typically those conversations are between the attorney and the financial advisor between closed doors hopefully uh until today uh my goal today is just to educate Edward Jones advisors on what they can do what they cannot do in a transition talk about the likelihood of actually getting sued and just discuss best practices when potentially considering making a change

Corey: my guest on the call today is an attorney that I’ve leveraged for many years with some of my clients and has more experience moving Edward Jones advisors and Consulting from one firm to another then most other attorneys that I know out there um and his name is Scott Madison Scott matisaurus is a uh attorney at Madison Jacobs and Scott how you doing today

Scott: good morning Corey how are you

Corey: I’m doing awesome thank you so much for taking the time today um I think what we’re going to cover today is something that a lot of Edward Jones advisors have questions about and they don’t really get the chance to do it until they’re at the very end of their due diligence process which isn’t a lot of financial advisors just aren’t willing to take that step at this time so this is a really great way for them to get some insight and learn at their pace so I really really appreciate it

Scott: happy to do it

Who is Scott Matasar

Corey: so Scott why don’t you just start off if you don’t mind just telling us a little bit you know about yourself and you know how you serve financial advisors and then you know specifically how you work with Edward Jones advisors through their transition

Scott: sure so my practice is focused 100 on representing parties in the retail Financial Services industry my clients range from uh broker dealer firms uh to Ria firms to Independent firms uh and as well as individual registered reps and iars literally uh 100 of my practice is focus on that industry and it ranges from day-to-day business counseling regulatory advice assisting advisors when they get in trouble with finra or the SEC uh negotiating and papering practice purchases and sales and and one particular vertical is is the recruiting space 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 over time

Scott: and what I can say you know at a high level Corey before we talk about Edward Jones 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 110 a PNC or some small Regional Bank more likely where they’re you know with the Raven 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

Should advisors be scared to move

Corey: so advisors should not be scared to move

Corey: 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 that have a lot of vested interest in them keeping and staying in their seats that you know would potentially tell them that that litigation rate is a lot higher

Scott: 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

What advisors can do

Corey: can you share you know just from experience in the past what some of those things are because I speak with a lot of financial advisors and they say you know Corey I can’t just open up my own office and sit at my desk in front of a phone and just wait for my clients to call like that’s not my personality so can you just kind of talk about you know some of the things that you’ve helped financial advisors do in the past

Scott: well sure and and we can talk about Jones more specifically in a bit but but at a high level Corey in in most situations and in Most states um an advisor is free to put together a uh contact list from publicly available sources using whitepages.com or some other source you know using their own home computer not on company time they can sit home and they’re fuzzy slippers and look up their clients on Google or what have you and put together a mailing list of their clients addresses phone numbers and emails from publicly available sources and have that when they leave um as long as they in the trick is to show that they haven’t taken with them any firm data um I mean unless you’re representing Tom Brady or some Russian oligarch who hides their contact information behind some Anonymous LLC an advisor should be able to look up almost all of their clients contact information publicly that’s number one

Scott: number two in the vast majority of states the the mailing out of a bare bones change of address announcement what you know they used to call a tombstone letter it is not deemed an act of quote-unquote solicitation because you’re just literally putting people on notice of here is my new contact information you’re not including any information about you know any language like please call me or stop by the office or or urging them to engage in any particular course of action you were just placing people on notice of your new office contact information and with a few exceptions primarily Illinois Maryland and Hawaii in Most states um the courts have held that that sort of a basic announcement sending it out to clients even if it’s a targeted mailing isn’t an act of quote-unquote solicitation so those are just a couple of examples of schools that advisors have available to them regardless of what their contract might say um that they you know to the Layman it looks like the the contract is Ironclad and they have they’re in a straight jacket but you know for a lawyer who specifically who does this kind of work this is not the when you’re transitioning this is not the kind of thing that you give to your your your sister-in-law’s brother who does Real Estate or trust in the Estates or their personal injury you need to hire somebody who specializes in working in the financial services industry and knows where the gaps are in those contracts and how to exploit them

Corey: yeah that’s that’s that’s great to know

Will I get sued

Corey: um you know I I work with a lot of financial advisors that um are bringing over you know 75 plus percent of their assets from one firm to another and they’re not doing that by you know just sitting at the phone and sweating and you know just waiting for you know their their financial advisors their their clients to call so thank you for giving a little bit of inside baseball on that

Scott: no absolutely so I mean if you want to turn now to Jones here’s what I can tell you I’ve probably moved conservatively over the years I’ve probably moved I don’t know 150 maybe 200 Edward Jones advisors over my over my career I’ve never actually totaled up but that’s probably a safe number and in all those years I’ve been doing this Corey I’ve had one advisor gets sued by Jones wow one and and that was sort of a unique I had another situation where they threatened to sue um and they were going to run to court the next morning when I called the posing Council and said hey I’m at the airport I’m getting on the plane to St Louis in 20 minutes what time is the hearing tomorrow morning all of a sudden he backed off and said oh well let’s talk about this and we settled the settled the dispute while I was sitting in chairs waiting to board the plane so Jones talks in my opinion Jones talks a good game but they really are litigation averse unless the advisor does something as I say it’s just out and out you know flagrant where they’re just begging to get to get themselves in trouble and um if they I mean in my experience if they follow my advice they are able to move without any problems from Jones um you know again you have to there are some things you can do and some things you can’t do but if you color inside the lines um you’re not going to get sued as I said 150 plus advisors and one one one suit in my entire career

What advisors cannot do

Corey: so whatever you’re more comfortable talking about Scott you know what what are some of the things that you can do or or or or what are some of the things that you absolutely you know cannot do whatever you’re more comfortable with

Scott: yeah well so I first want to say I am not providing legal advice on this podcast and nobody who watches it should should be acting upon my what I’m seeing on this podcast I’m not your attorney and you would need to retain me to review your particular contract and and give you advice so I want to be clear this is General guidelines um you know and and input for for educational purposes but what I can say is you know I I’m very familiar with the Edward Jones contract and it is written in such a way that um the sending out of a bare bones Tombstone letter like we talked about earlier is permissible it again doesn’t may not read that way to the Layman um but just by way of example the standard Jones contract that I see all the time says essentially you know Thou shalt not solicit for a period of 12 months after you leave and then it goes on to Define soliciting as soliciting means contacting uh clients that you’ve worked with for the purpose of inviting encouraging or requesting the advisor to the client to move their account over so it doesn’t say that you can’t contact the the clients as you can’t contact them for the purpose of inviting them to move and that’s sort of where the loophole is we’re sending out a plain Jane Tombstone letter um doesn’t fall foul of that limiting language in the contract and in fact virtually every financial advisor I’ve lifted out of Jones has sent a tombstone letter and and you know has had no pushback from The Firm or real pushback I mean they The Firm has been famous for having an outside Law Firm on retainer that sort of sends a a warning letter to try to scare advisors um and then I’ll typically respond to that law firm hey guys yeah it’s me Scott again got your letter you know my client is painting inside the lines you don’t have any basis to assume um consult have a nice day love Scott and uh and that is the end of it so Tombstone Letters by and large are perfectly fine I would say the only exception of that Corey is where the if the if the advisor has signed a good night agreement with a retiring advisor that contract is more stringent and puts more restrictions on the fa’s ability to interact with the clients that they’ve the of the book that they’ve purchased okay but for for the standard general you know uh you know uh Jones fa contract they as a general rule sending out a tombstone letter again using a mailing list generated from publicly available sources is permissible and or or I should say more accurately does not trigger litigation in my experience okay very helpful

Presoliciting clients

Corey: um is there anything that you can absolutely just should steer clear from

Scott: yeah um pre-soliciting your clients um you know I’m sure everyone at Jones knows the Playbook is that when you resign right the local local management will chop up your book and and assign it to several other advisors in your neighborhood who will then spend the day you know calling those clients in an effort to conserve the business and as part of that process the the replacement FAS will often probe with the customers to say you know to find out whether or not they knew in advance of their departure so you know for advisors thinking about leaving Jones you want to be very careful not to say anything that would tip the customers off even even alluding to it because it could be misinterpreted by the replacement fan by Jones to make them think that you were soliciting these clients while you were still there sure

Computer activity review

Corey: thank you that’s that’s super helpful

Scott: yeah and I’d say one other thing is just obviously to make sure you are not taking with you any client data whatsoever uh Jones will likely audit your computer activity for the last 90 or 120 days before you leave and if they see any sort of bulk downloads um either print jobs or a download to a Google drive or a USB drive um that’s going to be a red flag and will immediately get escalated so just understand your computer activity will be reviewed after you leave and you want to make sure that you are conducting yourself on the up and up

Risk of litigation

Corey: that’s my experience too Scott out of the 100 plus advice advisors from Edward Jones that I’ve helped move the one that I’ve seen getting some significant trouble was was doing just that they you know a week before Super Active on their computer and and and and downloading and taking as much information as possible and and that was a huge red flag right

Scott: well not only that not only can It raise your risk of litigation by Jones but Jones is likely to turn you into finra that’s going to start to start investigating you for misappropriating client you know pii yeah so and I’ve seen advisors you know be suspended from the industry for taking with them client information that they weren’t entitled to keep

Complicating things

Corey: thank you um so a few other things that I’ve seen that I’ve had um advisors have some concerns about um where they thought in the process it might complicate complicate things are maybe one Edward Jones advisor uh on one side of the region and one is on the other are really good friends you know potentially moving at the same time and teaming up together like in in one office or a financial advisor wanting to bring their boa with them their Administrative Assistant um does that complicate anything at all

Scott: it can the the Jones contract has a restriction against what I call a non-recruit but you can’t go you know trying to bring over other Jones personnel with you you know in those situations you know what I suggest is well it’s different if it’s two FAS in the same city that where they’re sort of equal and neither of them is in a supervisory capacity they could easily have been talking about this stuff you know over lunches for a period of months and it’s impossible to say who recruited who right I mean it’s the two of them sort of commiserating and deciding to leave together but with with wanting to take your boa with you different story uh and my advice in those situations is not to let the boa know in advance that you’re leaving again that that could be a red flag for Jones but you can you know on your way out the door make sure that your boa knows where you’re going knows how much you enjoyed working together and let them know that if if things aren’t working out for them at Jones and they decide that they in the future want to make a change you know here’s my phone number right because often cases you know right there’s no there’s nothing for that be a way to do if it’s a one-person office and it might be that after a week or two the boa is tired of you know bending paper clips and decides you know pictures of the phone calls The Departed fa and says you know I’m bored out of mind my mind over here you know do you have room for me and as long as it’s the boa initiating contact right then it should be fine um and having that sort of Gap of a couple of weeks um so that it’s not you know a one-two punch you know also will you know I think you know uh lessen any concern on the part of Jones that the advisor has violated their non-recruit that’s great to know

Legal challenges

Corey: um one other legal challenge I see a lot of um Edward Jones advisors run into um at one point in their career when they get to the right level they have the flexibility to be able to buy their own office space um and Edward Jones is a big firm and a great tenant so they have the ability to you know rent that space back to Edward Jones but that comes with some restrictive covenants in their contract so typically when a financial advisor wants to leave sometimes they need to go out and get new office space where one of their competitors moves into you know the office space that they love and they purchase for themselves which obviously causes some friction in the transition process have you ever worked with any Edward Jones advisors where that’s been an issue and has there ever been a solution for that and or or have they always had to move out of the space that they own

Scott: yeah I haven’t had that many I’ve had two or three situations like what you’re talking about Corey um and I’m trying to think um there I think at least in one I know in one of them the advisor just had to had to build up other space and move um and you know and do it and you can build out that space in advance you don’t have to wait till the day you quit to go out and rent space you’re you’re free under the law to rent space set up a website buy furniture get computers and be ready to go so that you can hit the ground running on day one that’s all permissible um I think in another situation if I recall correctly there were only maybe six months left on the lease and we worked something out with Jones to basically buy out the the balance of the lease and get them get them out of the office as the tenant for some sort of a lump sum um so that is an option obviously though the issue is you’re not going to know what if Jones is going to say yes or no to that until after you leave so you’ve got to have you know you got to be prepared to maybe work from your house for you know uh a couple of weeks while the situation with the with the landlord tenant situation when Jones gets gets worked out um so it is it is a complicating factor and there’s just one more way that Jones tries to lock people in you know if if they were in my opinion if Jones was such a great place to work they wouldn’t have to resort to those kinds of tactics to try to make their advisors captive

Edward Jones litigation posture

Corey: yeah for sure um is there anything else that you think Edward Jones you know advisors should know that are that are listening to this podcast today that we didn’t cover

Scott: I guess you know just the one thing I really want to emphasize is that in my opinion you know I don’t want to jinx it right but in my opinion Edward Jones’s bark is worse than his bite um they are well known for sending out you know threatening letters after advisors leave in an effort to intimidate them and maybe make them pull their punches and not do everything that they’re allowed to do but you know again unless you are moving in my opinion more than 50 to 75 million under management it just doesn’t make sense economically for Jones or frankly for any firm to bring litigation in an effort to try to keep the business it just um those kinds of proceedings we’re running into court to try to get a restraining order or to fight off a restraining order are very expensive you can easily spend tens of thousands of dollars in the space of a month and Edward Jones just like any other firm is not going to go throwing good money after bad and you really have to have a sizable book of business before it becomes economically rational for Jones or for any firm for that matter to try to run to court to shut you down

When should a financial advisor start retaining someone like you

Corey: awesome thank you so much I guess my last question Scott is you know when should a financial advisor start retaining somebody like you um I know there’s a lot of broker dealers out there at the end of the process um you know that will flip the bill to to protect them and to also protect the financial advisor you know as as they transition but you know when do you think the right time is to start having a conversation with someone like yourself

Scott: yeah I would say ideally 90 to 120 days out so three or four months before you leave um you know reviewing a contract and and providing the fa Clarity on what they can and cannot do early in the process allows us a lot more um ability to craft a customized strategy for that advisor on how to transition cleanly and how to make it easy for the clients to follow them without violating any effective covenants um and there are just frankly uh other strategies and other tools I have available that we haven’t talked about here today that I have available to me to an advisor who comes to me 90 days out that wouldn’t I wouldn’t have available if they come to me say 30 days out so I ideally at least 90 days in advance of departure date awesome Scott

Outro

Corey: thank you so much I know you’re extremely busy and I think this is going to be extremely helpful to financial advisors that that are considering change if a financial advisor wants to reach out to you Scott where can they find you

Scott: sure well maybe the easiest thing is to just call my office number which is 216 453-8180 I’m based in Cleveland Ohio but again I represent financial advisors Nationwide um that’s the nice thing about the industry is finra is finra is finra and so it’s all the same everywhere and I I represent clients literally in every state except for California and Louisiana because the laws there are a little more funky but um you know transition work literally I handle Coast to Coast

Corey: thank you so much again Scott and if anyone has any questions about the broker dealer or Ria space in general you can reach out to me at 908 -902-4903 or at uh Corey bridgemarkstrategies.com Scott I hope you have a great rest of the day and thanks again

Scott: thanks Cory pleasure chatting with you