Ameriprise accuses LPL of shady recruitment tactics

Ameriprise accuses LPL of shady recruitment tactics
Lawsuit claims LPL leaves advisors criminally liable as it encourages new recruits to take confidential information.
JUL 30, 2024

Ameriprise Financial is taking legal action against LPL Financial, accusing its rival firm of engaging in underhanded and potentially criminal recruiting practices that involve taking confidential client and company information.

The suit, lodged in the United States District Court in San Diego, claims LPL systematically directs advisors it recruits to take sensitive information from Ameriprise as they switch to LPL.

In a statement published Tuesday, Ameriprise alleged that LPL instructs new recruits to take confidential information as they defect from their former firms, effectively “[subjecting] the advisors it recruits to regulatory and criminal exposure.”

Other sources reporting on the lawsuit say it goes into further detail, claiming that LPL directed its new hires to take client social security numbers, account numbers, and other confidential data so as to solicit Ameriprise clients more effectively. In some cases, the suit claims the information is uploaded to unsecure networks, compromising client privacy.

The complaint highlights a pattern of behavior where LPL allegedly provides tools and instructions to recruits for scraping and transferring confidential information, in violation of industry standards and regulatory rules.

As per reporting by Barron’s, the lawsuit notes Ameriprise and LPL are both signatories to the Protocol for Broker Recruiting, which allows advisors to take basic client contact information when switching firms. However, Ameriprise maintains that LPL encourages advisors to retain information far beyond what the protocol permits.

“LPL encourages and instructs Ameriprise recruits to harvest confidential client information from Ameriprise’s systems to turn over to LPL shortly after affiliating with LPL, and in the past has provided recruits with the tools and instructions to do so,” the lawsuit states.

The suit also references previous incidents, including one in April where a team of advisors allegedly took boxes of confidential documents before joining LPL. Ameriprise filed a separate lawsuit against that team and LPL in June, for which a federal judge granted Ameriprise’s request for a restraining order against LPL on July 1.

“For years, LPL has flagrantly disregarded industry protocols in how it recruits financial advisors – and they have obtained and mishandled trade secrets and sensitive client data to which they are not entitled,” Michael Taaffe, partner at Shumaker, Loop & Kendrick, LLP, external counsel for Ameriprise, said in the Tuesday statement Tuesday.

Now, Ameriprise is seeking an injunction to prevent LPL from using any confidential information it obtained and to mandate the return of all such information.

Today’s legal filing is the first jab in what could be a major throwdown between two colossal brokerage firms, which together have over 30,000 financial advisors and approximately $3 trillion in assets.

“The pattern of behavior conducted by LPL is both shocking and concerning,” Taaffe said. “It is time for LPL to be held accountable for their reckless disregard for clients and advisors.”

LPL, meanwhile, claimed Ameriprise had its own interests in mind in filing the suit.

"Ameriprise’s actions are part of an ongoing effort to hinder competition in the financial services space and intimidate its advisors who might consider leaving to join another firm," a spokesperson for LPL told InvestmentNews in an emailed statement.

"As a steward of independence in our industry, LPL will vigorously defend itself against these claims and all of Ameriprise’s equally frivolous cases," the statement read.

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