Ameriprise Financial is seeking a restraining order against a former franchise representative in Hawaii who once handled $425 million in assets for the firm but departed for LPL Financial in June.
Alan H. Kodama, an advisor in Wailuku, Hawaii, had been with Ameriprise and its predecessor firms for more than three decades when he decamped on June 21, said Ameriprise in its complaint, adding that he brought in $3.3 million in gross production (fees, commissions, etc.) in 2020. According to Financial Advisor's 2021 "Broker-Dealer Review and Ranking," Ameriprise's gross revenue per rep in 2020 was $645,430.
Kodama reportedly deals with high-net-worth clients. A recent Barron’s ranking put his average client net worth at $1.4 million.
Ameriprise claims that Kodama took proprietary information with him to his new firm, including clients’ addresses and Social Security numbers, account numbers, investment product information, their net worth figures and their annual income amounts. The company claims that account transfer forms and an LPL welcome letter were sent from Kodama’s firm and LPL to one of his Ameriprise clients. The complaint adds that the forms were pre-populated with proprietary client information. According to Ameriprise, this client had not asked for a transfer of assets to LPL and was surprised to get the letter.
The company claims Kodama violated his franchise agreement when he used the sensitive client information. Ameriprise also maintains that taking such information without client consent violates the Securities and Exchange Commission’s Regulation S-P.
Kodama started with the firm in 1987 when it was still known as IDS Financial Services, the company said, and later signed a franchise agreement with successor firm American Express Financial Advisors, as it was known until 2005 (at which point it was spun off from American Express as Ameriprise).
“Ameriprise provided Kodama with access to the use of its name as well as, among other things, highly confidential and proprietary information about its businesses and clients,” said the company in its filing for injunctive relief. “This information included details about customer accounts, practice performance statements (which included information about production, product lines, number of clients, and other proprietary details), and book of business reports. The book of business reports included client information, names and financial information that can be used to evaluate whether a financial advisor is successful, including the advisor’s relative rank in the region.”
The complaint continues: “By having access to this highly confidential and trade secret information for the clients with whom he consulted, Kodama gained a deep understanding of the Ameriprise platform, which provided him with a competitive advantage.”
Kodama’s new LPL-affiliated firm in Honolulu is called PacStar Financial Group. In the press release announcing his arrival, LPL said Kodama started his practice right out of college in Honolulu. It said over the years he purchased seven other practices to build out his multi-office firm and now has locations in Kauai, Pearl City and Maui. LPL said the PacStar team includes Kodama as CEO and president, and he brought along other longtime Ameriprise vets including Thomas Lodico, John Araki and Rose Antonio.
Alan Kodama had not made a statement by press time when contacted by Financial Advisor.
Jodie Papike, a recruiter at Cross-Search Advisor Placement Services who works with both LPL and Ameriprise but who is not familiar with this specific Ameriprise complaint and couldn’t comment directly on it, noted that advisors are facing more uncertainty when they decide to leave a firm, especially now that some big brokerages have left the "broker protocol" that gave advisors flexibility to take some client information with them. That arrangement was meant to tamp down the costly lawsuits of the past when firms tried to sue departing advisors. But the protocol in the past few years has started to break apart as the battle royale for high-producing reps gets more intense.