Mariner Wealth Advisors has been granted a partial temporary restraining order against three former advisors in Cincinnati who it said stole trade secrets and poached clients when they left for a rival firm.
The three advisors left in mid-May to join New York-based Savvy Advisors; Mariner said Savvy’s efforts allowed it to raid clients with some $60 million in assets. The three advisors had been on a team serving employees of consumer goods company Procter & Gamble, specializing in employee benefits at the firm.
Mariner brought the suit against Savvy and advisors Brad Morgan, Nate Kunkel and Timothy Gerard, in late June, filing in the U.S. District Court for the Southern District of Ohio in Cincinnati. Mariner claimed Savvy had advertised to wealth managers in Overland Park, Kan., Mariner’s home turf, seeking advisors with “portable” books of business. "Savvy’s motivation for recruiting the individual defendants was, in large part, to obtain AUM from Procter & Gamble employees, retirees, and families, thousands of which are located in the State of Ohio,” Mariner said in its complaint. It also accused one of the advisors of taking confidential client information in a spreadsheet, downloading it from the cloud onto a work computer.”
According to the judgment issued Friday, the three advisors cannot directly or indirectly solicit customers “whom they provided services while at Mariner, or with whom they otherwise did business while at Mariner.” It also said that Morgan cannot solicit any Mariner customer he came to know from working there.
However, the restraining order was more limited than Mariner wanted, and some of the court’s findings seemed to vindicate the ex-advisors.
The court also spelled out that solicitation does not include information that the three “provide in direct response to a question that a former customer poses to them, such as ‘What would I need to do to transfer my business to you?’ or ‘Are you willing and able to provide services to me at your new business?’” The court rejected Mariner’s request that a more expansive definition of “solicitation” apply to the three ex-advisors.
The court also said that Mariner had not offered any proof that one advisor, Morgan, had forwarded anything to himself from his work computer other than personal calendar appointments, which aren’t protectable trade secrets.
A Savvy spokesperson contacted by Financial Advisor wrote, “We are happy that our colleagues may, consistent with the court’s order, have contact with their former clients. We believe that clients have the right to work with the financial advisor of their choice and to be informed when their advisor moves to a new firm. Mariner Wealth Advisors had sought to prohibit those communications. We fully intend to continue to abide by the court’s ruling.”
While lawsuits against defecting advisors are common in the wirehouse world, litigation in the RIA world has been more muted until recently, when two poaching cases, both involving Mariner, hit the court dockets (while Mariner was the attacker in the current case, it was the defender in a suit filed by Edelman Financial Engines in November).
In Financial Advisor’s most recent RIA survey, one CEO, Peter Mallouk of Creative Planning, also in Overland Park, Kan., said that while registered investment advisors used to pick off advisors from the wirehouses, that engine of growth has been running out of steam, and the war for growth and talent means firms in the future more likely to have to take advisors from one another.
Mariner had not returned a request for comment by press time.