A financial advisor’s new lawsuit in federal court in Kansas alleges that Mariner, one of the most prolific buyers of registered investment advisors for more than a decade, allegedly defrauded the advisor out of his book of business in the months after buying his firm last April.
The advisor, James Hyre, alleges that Mariner “willfully and maliciously misappropriated the book of business through its knowing, intentional, fraudulent, and, or tortious conduct,” according to the complaint, which was filed last Wednesday in federal court in Kansas.
James Hyre and his firm, Hyre Personal Wealth Advisors, are seeking damages and suing Mariner for breach of contract, fraud, negligent misrepresentation and other claims.
Calls to Mariner Wealth of Overland Park, Kansas, on Monday were not returned.
“We intend to pursue this,” said Perry Brandt, attorney for James Hyre.
When asked about potential damages his client was seeking, Brandt replied: “It’s going to be a big number. Basically, they walked off with Hyre’s book of business.”
A financial advisor’s book of business is the list of clients, relationships, accounts and assets for whom the advisor manages money. It is the single most valuable asset in any financial advisors’ business, and the basis for which the advisor generates revenue and income.
Mariner Wealth, with $98.6 billion in assets, last April bought the Columbus, Ohio-based Hyre Personal Wealth Advisors, which at the time managed $325 million for clients.
The price was $39 million, according to the complaint, with almost two-thirds comprised of stock and the bulk of the rest tied to reaching growth targets, according to the complaint. James Hyre was to be paid $1.5 million annually in management fees, as well, after the incentive targets had been reached.
The acquisition soon became contentious, the lawsuit alleges, with James Hyre noting that Mariner was allegedly falling far short of its obligations, from issues ranging from technical support to pay to autonomy with existing clients.
According to the complaint, at one point last year Mariner offered to purchase James Hyre’s equity in Mariner — then worth $28 million — for $25 million and then submit a Form U5 status of “permitted to resign” in exchange for Hyre’s signing a broad release of his legal claims against Mariner.
Firms file a Form U5 with FINRA when an advisor leaves a firm.
The designation of “permitted to resign” on a financial advisor’s employment records and work history is widely viewed in the financial advice industry as a negative mark against an advisor.
The months of acrimony between Mariner and James Hyre came to a head days before last Thanksgiving, according to the complaint, when the firm first indicated it was submitting a “permitted to resign” designation on his work history, but in the end did not do so, according to the complaint.
Hyre’s registration at Mariner Wealth concluded on November 26, according to his work profile with the Securities and Exchange Commission.
Mariner Wealth has a history of litigation with employees and advisors.
It was among a group last year that agreed to create a $25.5 million fund to settle a class action lawsuit alleging that it and two other firms in the Kansas City area colluded to suppress the labor market for local advisors.
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