Ameriprise Financial and LPL Financial, the two largest independent broker-dealers by revenue, are also among the fiercest competitors in recruitment—and these days often find themselves at odds while trying to swipe each other’s advisors.
But according to an Ameriprise lawsuit filed this morning in San Diego, its rival’s methods have gone too far, and it said LPL has engaged in a pattern of stealing its trade secrets.
The lawsuit, filed in a federal court in Southern California, claims LPL has been harvesting and misusing private client information while pursuing the advisors it lured away from Ameriprise. The latter firm alleges that LPL’s acts have violated laws and regulatory requirements—and run afoul of a protocol for broker recruiting that both companies are party to.
“We’ve seen a widespread pattern where LPL allows, encourages and misleads its advisors to blatantly violate the protocol for broker recruiting, among other industry standards and regulations by harvesting and misappropriating Ameriprise’s confidential client information and trade secrets,” Ameriprise said in a public statement about the lawsuit, filed in the U.S. District Court for the Southern District of California. LPL “ systematically directs the advisors it recruits from Ameriprise and its competitors to take confidential information on their way out the door,” the firm added in a press release.
Ameriprise insists that LPL has put clients at risk by telling the advisors it recruits to upload spreadsheets with client information, including Social Security numbers, ages and net worth “to poach clients without prior knowledge or consent.”
The firm said that LPL’s conduct both violates clients’ privacy—and even puts the advisors who move at risk of criminal exposure, citing a case in Florida in 2022. Though Ameriprise didn’t use the name, the company appears to be referring to Nathaniel W. Adams, an ex-LPL advisor, currently suspended by the Financial Industry Regulatory Authority (Finra) after being accused of forwarding customer information to a family member’s email account. Though he was brought up on felony charges in Florida, they have reportedly been dropped.
“The pattern of behavior conducted by LPL is both shocking and concerning,” said Michael Taaffe, a partner at Shumaker, Loop & Kendrick and outside counsel for Ameriprise, in a prepared statement. “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.”
Ameriprise wants the court to stop LPL from using its confidential information while the case also goes through arbitration with Finra.
According to the suit, “Unless LPL is enjoined from retaining and using Ameriprise’s confidential and trade secret information, Ameriprise will continue to be irreparably harmed by: (a) disclosure and misuse of trade secrets, client lists, and/or other confidential information that are solely the property of Ameriprise and its clients; (b) loss of confidentiality of the information contained in clients’ records, loss of confidentiality of clients’ financial dealings, loss of confidence and trust of clients, loss of goodwill, and loss of business reputation; (c) damage to office stability, and a threat to the enforcement of reasonable contracts; and (d) present economic loss, which is unascertainable at this time, and future economic loss, which is presently incalculable.”
When contacted by Financial Advisor, an LPL spokesperson said: "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. As a steward of independence in our industry, LPL will vigorously defend itself against these claims and all of Ameriprise’s equally frivolous cases."
Crossing Paths
The two companies are used to Red Rover games with each other, as advisory teams often cross between the two. But the rivalry recently turned rancorous when an Ameriprise father-and-son advisory team, Mitchell and Wesley McCann, migrated to LPL in April. The McCanns, who worked in the Bloomfield Hills, Mich., office of Ameriprise and managed $249 million, were accused by Ameriprise of stealing confidential information to woo clients. The firm accused LPL of encouraging this conduct.
“In April of this year,” the new lawsuit says, “LPL had a team of advisors take bankers boxes full of confidential documents off of the Ameriprise premises immediately prior to their transition, which they utilized to solicit clients prior to even resigning from Ameriprise to get a jump-start on their transition to LPL. One Ameriprise client even complained they had received a plain, unmarked envelope filled with detailed, unredacted, highly confidential personally identifiable information such as Social Security numbers from the McCanns.”
“A large percentage of those registered representatives who have left Ameriprise to go to LPL have engaged in similar misconduct,” Ameriprise says in its lawsuit. The firm says LPL has also been forwarding its clients’ information to third parties.
Ameriprise won a temporary restraining order against the McCanns earlier this month that sought to keep them from soliciting their Ameriprise clients.
Ameriprise firm says LPL’s actions have violated the Defend Trade Secrets Act as well as Finra rules.
As part of its request for relief, Ameriprise is asking that LPL find all electronic devices used by any LPL employee or advisor and with forensic analyst help purge Ameriprise’s confidential information. It also wants all its confidential information, including paper and electronic, to be returned.