Avantax is suing Mariner Wealth Advisors—again. It’s the latest instance of Mariner being the target of litigation in recent months.
The Iowa-based, tax-focused planning firm filed a complaint against former employee Molly Nelson and Mariner, her new employer. The suit comes a few weeks after Nelson filed a lawsuit against Avantax, arguing the restrictive covenants signed while working there would make it impossible for her to work in the industry.
In its complaint filed in Iowa federal court, Avantax argued Nelson endangered the firm’s proprietary business model, involving partnering with CPAs to help them offer wealth management strategies to their own customers (as well as the clients Avantax works with directly).
Avantax argued this set-up gives it a “competitive edge” over competitors like Mariner, which “can quickly and permanently disappear if the relationships between Avantax and its CPA firm clients are damaged,” according to the complaint. Losing CPA firm clients could be disastrous, as it’s “literally impossible” to know how many end-user clients would land at Avantax due to those relationships.
Nelson began working for the firm in 2019, serving clients in her home base of Montana and throughout the country. According to Avantax, Nelson derived a “direct financial benefit” after being given CPA firm clients to work with. Over time, she became familiar with trade secrets concerning Avantax’s CPA clients.
When Blucora rebranded as Avantax in 2023, Nelson signed a new version of the restrictive covenants, including non-solicitation agreements for clients as well as a non-compete mandate that she could not work for a “competing business” for 24 months after her Avantax employment ended.
But on Jan. 18, Nelson told Avantax she was leaving and joining Mariner. According to Avantax, Nelson also solicited Avantax clients “under the guise” of a purported obligation from FINRA to let clients know about her leaving the firm.
“Nelson’s solicitations in the days since she left have already resulted in many clients converting from Avantax to Mariner,” the complaint read. “Several clients whom Nelson has solicited have expressed anger at Avantax when they called Avantax to make arrangements to transfer their services after Nelson’s solicitation.”
Avantax accused Nelson of relying on and disclosing trade secrets and proprietary information to Mariner (with the firm’s encouragement and support). But in her suit filed last month, Nelson claims Avantax was in the wrong by trapping her in restrictive covenants that wouldn’t allow her to do business with any of her former clients, even if she didn’t solicit them.
Nelson argued in her complaint, filed in Montana federal court last month, that those covenants were “vague, overbroad and unenforceable” and violated Montana law,
Avantax’s other ongoing litigation against Mariner, which names Mariner and advisor Michael Carignan as defendants, began last fall in Iowa state court before moving into federal court last month.
In the suit, Avantax claimed Carignan broke the terms of his restrictive covenants after leaving Avantax and heading for Mariner with that firm’s encouragement.
Spokespeople for Avantax and Mariner declined to comment, citing the pending litigation.
The legal spats between Avantax and Mariner are but a few of the several suits targeting Mariner filed in recent months. The RIA aggregator is currently locking legal horns with Edelman Financial Engines in Kansas federal court. Edelman accused Mariner of a calculated, multi-year campaign to steal Edelman’s trade secrets and advisors, while Mariner argued Edelman was using the courts to “unlawfully stifle free competition.”
RWA Wealth Partners also accused Mariner of using one of their advisors as a “secret agent” to pilfer the client lists and trade secrets of Polaris Wealth Advisory Group (which later rebranded as RWA).
Naming firms in these kinds of suits (as opposed to individual advisors) is uncommon, according to David Abell, an Albuquerque, N.M.-based managing attorney at Abell Law, who often represents advisors moving between firms.
“So, the fact that multiple firms are making these allegations might indicate there’s a pattern,” he told WealthManagement.com. “Then again, maybe Mariner’s recruiting efforts are just very successful, so they’re exposed to these kinds of allegations, and they may not be true."
