A former affiliate of LPL Financial in Kentucky has accused the giant broker-dealer of raiding the firm, saying LPL encouraged three of the ex-affiliate’s advisors to leave and take clients and assets with them.
Plaintiff Lamkin Wealth Management, a Louisville firm, said the former advisors, with “coordination, encouragement, direction, and support from” LPL Financial LLC, schemed to steal all clients from Lamkin, also known as LWM, according to a complaint filed in a Jefferson County Circuit Court in late January. That case was removed to a federal court last week. Louisville Wealth Management of Louisville is also listed as a plaintiff.
Lamkin Wealth had been with LPL since 2001 but the advisory started shopping around for a new broker-dealer in 2017 after bad blood formed between the firms—after Lamkin thought LPL had failed to properly oversee the transactions of a rep eventually reprimanded by regulators.
The LPL affiliation with Lamkin was terminated in 2018 and Lamkin Wealth said LPL began a retaliatory campaign by conspiring with three advisors to steal Lamkin’s clients and assets. Lamkin Wealth’s client assets under management cratered to zero from more than $451 million the day after the advisors quit the firm “as a result of the actions of LPL,” according to the suit. All three advisors resigned or quit on December 5, 2018.
Lamkin Wealth is seeking, among other things, $10 million in compensatory damages.
The firm also said in the filing that its civil suit against the three former advisors is now being litigated in Jefferson County Circuit Court and is “currently on appeal.”
“Simply put, LPL orchestrated, assisted and executed a classic corporate raid against LVM, its own affiliate, by actions of three of LVM’s employees, who were at the time also affiliated with LPL,” Lamkin Wealth stated in the filing.
LPL Financial, in an email to Financial Advisor, said it doesn’t respond to legal issues, as per policy.
Mark Lamkin, founder of Lamkin Wealth Management, couldn’t immediately be reached for comment.
LPL Financial is the largest independent broker-dealer in the country; the suit doesn’t say whether the former advisors skipped to LPL’s platform. The filing did note that one of the advisors opened his own shop upon leaving Lamkin Wealth. Nevertheless, the suit comes as industry observers expect an uptick in raiding or poaching in the RIA space as companies search for shrinking talent and the industry consolidates.
Publicly traded LPL Financial Holdings of San Diego has more than 20,000 advisors on its platform, managing more than $1 trillion in client assets.
Besides claiming the advisors took Lamkin clients and assets on their unexpected departures, the plaintiff also alleged that LPL essentially persuaded the advisors into thinking they were acting in Lamkin Wealth’s best interest and, consequently, wouldn’t violate the restrictive covenants they’d signed upon joining the firm.
The former advisors included in the suit are Jonathan Upton, who worked for LWM from 2008 to 2018; Gregory Smith, from March 9, 2012 to 2018; and Bruce Lindsay, whose book of business Lamkin Wealth purchased “on or about February 17, 2015,” according to the filing. The firm said it paid Lindsay $541,000 for his book of business.
In bringing Lindsay on board as financial advisor, Lamkin Wealth was also securing Lindsay’s rights in client accounts, client lists, clients files, among other rights, the lawsuit says. The advisor, according to the suit, signed an agreement with Lamkin Wealth that prohibited him from, among other things, soliciting or diverting any business or service from “any person on the client list or from any person who is or was an actual, potential or prospective customer or client of LWM after the date of the agreement.”
The advisors in the scheme, the suit claimed, signed non-compete, non-solicitation agreements upon employment and assured Mark Lamkin throughout that they would continue with the firm until he found a new broker-dealer.
But the three all left the firm on the same day, without notice, taking with them company files and clients “book-of-business” they’d sold to Lamkin Wealth, the lawsuit said. Upton opened his own shop after quitting the firm.
The relationship with LPL originally went south after Lamkin said that the giant broker-dealer failed to properly vet transactions by advisor Donald S. Woods (who was suspended by the Financial Industry Regulatory Authority in 2020 for making unsuitable recommendations in real estate). Lamkin said in its suit that it had to assist its clients to make them whole and after that Lamkin’s “personal relationship with LPL was beyond repair.”
Knowing that Lamkin was looking to drop it as broker-dealer, LPL began “conspiring with, encouraging, coercing, and/or otherwise causing” the advisors to leave Lamkin Wealth before that switch happened, according to the filing. Then “LPL would be able to control LWM’s clients and misappropriate LWM’s AUM.”
In retaliating against the firm, LPL “began looking for pretexts to damage both [Mark] Lamkin and LWM,” the plaintiff claimed. The broker-dealer’s moves to damage Lamkin included what the firm described in the complaint as a “witch hunt” investigation into the founder.
LPL, as part of this probe, alleged that Lamkin erred in filling out reporting forms for a loan involving his then wife from a client. The suit also said Lamkin, without “admitting any or denying the facts” of LPL’s accusations, agreed to pay a $7,500 fine and to a 90-day sit down, or suspension. Finra has jurisdiction over such matters.
LPL “wrongfully” terminated Lamkin’s affiliation with the broker-dealer “on or about August 17, 2018,” according to the plaintiff. Lamkin approached Calton & Associates in 2019. Lamkin and LWM are now affiliated with Calton as their broker-dealer, LWM said in the suit.