More than two months after being sued by Ameriprise Financial Services for allegedly violating securities laws related to clients’ privacy when recruiting and hiring Ameriprise advisors, LPL Financial on Thursday took a shot back at its rival, claiming in a court filing Ameriprise’s complaint was a “public relations stunt masquerading as a lawsuit” and that the firm gives “lip service” to the notion of advisor independence.
For decades, big firms like Ameriprise and LPL Financial have used litigation as an attempt to hold onto clients and deter competitors hiring or recruiting financial advisors.
The rash of lawsuits got so bad that, twenty years ago, a handful of large firms created the “protocol for broker recruiting” to establish guidelines under which a financial advisor leaves one firm and works at another, walking out the door with a limited, reasonable amount of their clients’ information: client name, address, phone number, email address and account title.
“Ameriprise is suing LPL, but a time will come when an LPL team will move to Ameriprise, so it’s really a two-way street,” said Louis Tambaro, an industry attorney. “These kinds of lawsuits have a chilling effect on the free market.”
“The bigger issue is, what’s the message being sent to advisors and clients if these types of actions are being routinely brought,” he added.
A spokesperson for Ameriprise did not return a call on Friday to comment. A spokesperson for LPL Financial said the firm had no comment beyond Thursday’s court filing.
In July, Ameriprise Financial Services, the large broker-dealer arm of Ameriprise Financial Holdings Inc., sued LPL Financial, the brokerage unit of LPL Financial Holdings, in federal court in Los Angeles, claiming the latter was “engaged in a widespread pattern and practice of harvesting and misusing private, confidential client information as they recruit advisors in violation of legal, regulatory and industry obligations.”
“The pattern of behavior conducted by LPL is both shocking and concerning,” said Michael Taaffe, outside counsel for Ameriprise, in a statement at the time. “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.”
LPL returned fire this week.
“For years, advisors have left Ameriprise to work with LPL because LPL offers a superior opportunity for these advisors to serve their customers,” LPL claimed in its court response. “Advisors’ preference for LPL is not surprising: while LPL champions the independence of its advisors, Ameriprise gives it only lip service.
“Frustrated by its failure to compete in the market, Ameriprise has fired back, filing this suit and this motion as a means to issue press releases tarring LPL with false accusations of impropriety and simultaneously scare its advisors into staying put.”
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