Question about non-compete clauses after forming RIA

4 replies [Last post]
Sithsayer's picture
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Joined: 2008-07-09

I've never seen this question discussed in reference to forming a new RIA. I understand that employing broker dealers, especially Edward Jones can and will file TRO's against breakaway brokers.  But can they also file them when a broker forms their own RIA and has no broker/dealer affiliation?  In my case I am thinking about leaving the mother ship, but would only do so by starting my own firm as a "fee only" RIA. Do I need to be concerned about them or do they have no recourse when someone starts their own firm?  For those that have left mother green to form their own RIA, I would appreciate if you could share some of your experiences with contacting your clients to move them over.   I have about 35mm AUM scratch starter, only want to keep 15-20mm of it (70HH), CFP, yada, yada.   Thanks for input.

matt1957's picture
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Joined: 2008-08-25

There are loopholes. 

Magician's picture
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Joined: 2008-05-19

Your contract states (at least mine did) that you cannot solicit clients while in the industry.  My attorney read that as the "brokerage industry".  If you are an RIA, you are not in the brokerage industry.  Your are an investment advisor.

matt1957's picture
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Joined: 2008-08-25

Magician - that would be one of the loopholes.

TheNextLevel's picture
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Joined: 2010-04-27

It all depends on the language and the firm.  To a smaller extent, the local managements attitude comes into play.  If your contract states you have a true non compete, it wouldn't matter where you were trying to move your clients.  They have the right and most likely will pursue and look to be compensated for thier loss.  By the EDJ is known to be the firm most willing to go after brokers who leave.  It would be advisable to honor your contact and transition your book under protocol if at all possible.

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