It's typical if not expected in the broad financial advice industry for the firm, usually a broker-dealer, to fight with a financial advisor over his or her clients, known as the advisors' book of business, when the advisor bolts to exit and work at another firm or set up shop independently.
But advisors struggle over control of clients, and the fees and commissions those customer accounts generate, too.
In an arbitration dispute that took more than four years to decide, two former business associates and Miami, Fla.-based financial advisors, Eduardo Augsten and Gustavo Vega, were fighting over revenues generated by the "book of business," according to a recent arbitration award.
The root of the dispute was that the two partners were working with only a "handshake" agreement, rather than a written contract, said Jeffrey Sonn, Augsten's attorney.
"They operated the firm under a handshake deal and that was the mistake," Sonn said in an interview on Thursday. "The reason why financial advisors have these agreements is to avoid these kinds of fights."
According to the award from May 17, in which three Finra dispute resolution services arbitrators awarded Augsten $376,000, his complaint stemmed from the "dissolution" of the partners' business, a firm called Wealthengage.
Both were financial advisors in South Florida registered with Raymond James Financial Services Inc. at the time Augsten sued Vega.
Javier Rodriguez, Vega's attorney, declined to comment about the matter.
In the lawsuit, filed in January 2020, Augsten was seeking unspecified compensatory and punitive damages; costs related to the joint office and lease, and other issues, according to the Finra award.
Regarding the book of business, Augsten was seeking an “equitable lien on the revenues" generated by the clients fees and commissions, according to the award, as well as reimbursement for any debts he was charged after the partnership ended.
"Augsten was 50% owner of the firm, and he contributed a lot of money to the company to start it," Sonn said. "Augsten was the back office of the operation while Vega was the front of the house. and they were his clients. But the two had a five-year lease together."
"The arbitration panel agreed with Augsten and we're very happy with the result, but if you're an advisor, make sure you have a clear agreement and not just a handshake," Sonn said, adding that his colleagues Adolfo Anzola and Brian Pastor also represented Augsten in the case.
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