Choreo sues Compound Planning, claims it poached $1.2B Iowa advisor team

Choreo has filed a lawsuit against four former employees and their new employer, alleging violations of trade secret laws, breach of contract, and improper solicitation of clients.

The case, filed in the US District Court for the Southern District of Iowa, claims the advisors coordinated their resignations and took confidential information to Compound Planning, a competing RIA.

Compound Planning officially welcomed the $1.2 billion advisor team to its new Des Moine, Iowa office on Tuesday.

According to the complaint filed on Wednesday and reviewed by InvestmentNews, former Choreo advisors Kevin Lors, Aaron Schomer, Joleen Scheer, and Lindsey O’Neil resigned from the firm on January 30 and soon after joined Compound Planning.

"Put simply, all lead wealth managers of Choreo’s Des Moines, Iowa office resigned at the same time," the complaint read in part. "Collectively, they were responsible for overseeing all of the business serviced by the Des Moines office."

Choreo alleged that they improperly used proprietary client data and encouraged Choreo clients to move their assets to their new firm.

In the 64-page filing, Choreo maintained that the information it has collected on clients – including names, financial details, and investment strategies – is confidential and should be protected under federal and state trade secret laws.

“This client information is critical to the success of the Choreo-client relationship and provides Choreo with the competitive edge needed to effectively service its clients,” the firm said in the lawsuit. It noted that the data unlocks deep insights into clients’ financial needs, and losing access to it would make it difficult for a competitor to replicate the relationship.

The firm also asserted that the defendants violated employment agreements prohibiting former employees from soliciting clients or other Choreo employees for a period after leaving.

Choreo claimed several clients terminated their relationships with the firm shortly after the advisors left, with one indicating he plans to work with one of the former advisors at Compound Planning. Those clients handed in formal 30-day termination notices, which Choreo said suggests they were instructed on how to exit.

"The long tenure of these covered clients with Choreo make clear that their notice of termination just days after the individual defendants left Choreo, is no coincidence," it said, noting that the 30-day timeline aligns with a contractual provision most clients are unaware of.

Choreo also named Compound Planning in the lawsuit, claiming it knowingly encouraged the advisors to break their contractual obligations and misappropriate trade secrets. The firm pointed to the Tuesday news release announcing the Des Moines advisors' move to Compound Planning, which said that the firm had added a “$1.2 billion advisor team.”

“Compound would not have been able to advertise that the individual defendants oversaw $1.2 billion in assets under management in the BusinessWire article if the individual defendants had not shared this confidential information with Compound,” the complaint stated.

Choreo accused Compound Planning of a broader pattern of targeting RIA firms and recruiting advisors with the expectation that they will bring their client books with them. It said Compound has been involved in similar disputes with other firms, and that its CEO has publicly discussed a strategy of growing the firm by getting advisors from competitors, expecting them to bring their book of business along. 

In March last year, retirement industry giant Empower sued Compound Planning after the defection of an advisor group from Personal Capital, a firm it acquired in 2020. According to that complaint filed in Colorado, "Compound Planning chooses to poach employees and clients from its competitors, like Empower, by inducing its competitors’ employees to misappropriate trade secrets and engage in other unlawful conduct."

By April, Empower, Compound Planning, and the advisors had reached a preliminary agreement that, among other things, forbade the former Personal Capital advisors from reaching out to clients under their former firm, as well as people they may have eyed as prospects in the six months leaing up to their departure.

In addition to seeking financial damages, Choreo is requesting a court order preventing the former employees from soliciting or servicing its clients for the duration of their noncompete agreements. The firm also seeks an injunction barring Compound Planning from using any confidential information it may have received.

"While no firm wants to take this kind of action, the choices of the departed advisors and their new employer compelled us to protect Choreo and our clients," Choreo said in a statement provided to InvestmentNews Wednesday. "We are confident in our position and look forward to addressing these issues through the legal process."

“The advisors adamantly deny the allegations contained in the complaint, which is Choreo’s version of the events in this matter," said Michael C. Ward, partner at  New York-based law firm Barton, who's representing Compound Planning. 

"While I can’t offer many details given the case is ongoing, I can tell you that the public policy is in favor of client choice, and the public will see a response to the complaint at the appropriate time,” he said in an email Wednesday afternoon.