Has
Bank of America Corp. upped the ante in the battle between the wirehouse and the independent advisory firms gunning for their top producers?
A document obtained by Bloomberg News earlier today suggested that a new employee agreement at the bank’s U.S. Trust division would dramatically change the rules under which advisers could leave the firm and solicit clients to join them.
The new policy would require advisers to take a “garden leave” from the firm of up to 60 days, during which time the firm could assign (or not assign) them any duties. They would forfeit any bonuses due to them, and would have to wait six months before soliciting their former clients. Such restrictions are highly unusual for financial advisers, said Andy Tasnady, president of recruiting firm Tasnady & Associates.
The new rules come three months after Michael Brown, a U.S. Trust adviser reportedly managing $5.9 billion in client assets, left the firm for Dynasty Financial Partners — one of the more aggressive independent advisory firms targeting high-end producers.
Bank of America sued Mr. Brown and settled the dispute in January.
According to a U.S. Trust spokeswoman, however, the Bloomberg report exaggerates the significance of the new agreement. “This was simply a streamlining of two existing policies at U.S. Trust that now cover more employees,” she said.
The spokeswoman also confirmed that the agreement did not apply to
Bank of America Merrill Lynch, which along with Smith Barney and
UBS Financial Services drafted the so-called broker recruiting protocol in 2004. The protocol stipulated that as long as departing brokers or advisers followed certain rules, they won’t get sued.
The most significant rule is that the departing adviser not disclose client information to the new firm before the client agrees to move his or her assets. For the most part, the protocol has worked well since then.
However, U.S. Trust, a wealth manager founded before the Civil War, has never followed the broker protocol. “The firm has a team-based approach to client service. It’s a different business model. An adviser only services a small piece of a client’s assets here,” the spokeswoman said.
The tough policies at U.S. Trust don’t sit well with some recruiters. “For U.S. Trust to say they own a client account is ridiculous,” said Danny Sarch, president of Leitner Sarch Consultants. He has helped dozens of wirehouse advisers move to independent firms over the past decade. “They have to compete for the client’s business.”
As for the new policies signaling a more combative approach by
Bank of America with poaching independents, they aren’t, said the U.S. Trust spokeswoman.
“We lost a total of 36 advisers across the whole bank to independent firms last year,” she said.
