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Network bosses hammer out client ownership pact

by Michelle Abrego on Feb 05, 2013 at 10:20

Network bosses hammer out client ownership pact

National and network bosses and trade bodies are a step closer to hammering out a protocol over client ownership, a year after Towry’s High Court battle with Raymond James thrust the issue into the limelight.

A 20-member group including representatives from Tenet, St James’s Place, Raymond James and Intrinsic have agreed on a working draft, which has now been sent to lawyers Pinsent Masons and Faegre Baker Daniels for scrutiny.

The Tax Incentivised Savings Association (Tisa) set up the group and said the current draft was ‘very high level’, with debate still raging about the details, but that it expected to issue a protocol within six months.

Tisa policy director Malcolm Small (pictured) said the agreement would be principles-based, but contain some prescriptive detail over some issues, such as the amount of time advisers should wait before contacting ex-clients after they have moved to a new job.

Members of the group are divided over that issue, with opinion split between a three- and six-month requirement. ‘There is a divergence of views, with some people saying it should be six months while some think it should be three… I think it’s steering more toward three than six,’ said Small.

Agreement on a draft protocol comes a year after Raymond James’s victory over Towry in the High Court, after Towry had accused it of client solicitation. The case focused on whether seven advisers formerly at Edward Jones, which Towry bought in 2009, breached Edward Jones’s restrictive covenants when they joined Raymond James, later advising former clients.

In the aftermath of that victory, Raymond James called for an industry-agreed protocol on restrictive covenants. It had proposed that the UK adopt a US agreement, but the Tisa-led group rejected that approach.

‘The protocol from the US unfortunately had too many references to conditions in the US market. We gave it careful consideration but decided at the end of the day to prepare one specifically for the UK market,’ said Small.

Gill Cardy, managing director of IFA Centre, which is part of the group, said she was seeking to ensure the agreement protected small IFA firms, unlike the US protocol, which she said was drafted with the interests of larger institutions in mind.

‘I am trying to make sure [the protocol] protects the interests of smaller firms, where losing a member of staff could have much bigger impact then at a firm like Merrill Lynch.’

27 comments so far. Why not have your say?

j p

Feb 05, 2013 at 11:22

this is a contract law issue not a protocols issue

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Julian Stevens

Feb 05, 2013 at 11:35

As members of a network, we've always been led to believe that our clients are our clients and, as far as the network is concerned, always will be our clients.

Ownership of clients of a national firm such as Towry Law, which isn't a network, is a an entirely different matter.

As for clients of SJP, one presumes SJP would refuse any dialogue over their affairs with any agent other than one of its own partners.

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James Clancy

Feb 05, 2013 at 11:55

One party seems to be missing from this protocol and that are the client. Surely, he has a big say in the matter of how their affairs are looked after and their money is managed.

It is time commonsense was applied to claim ownership. It has to be equitable for all parties.

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Michael Shea

Feb 05, 2013 at 12:04

I have wrestled with client ownership issues in the past. The big picture is that no-one owns a client, who may have an IFA for personal financial planning, a different IFA who handles the company pension scheme, a bank and a mortgage lender, both of whom have the right to contact the client about financial matters. The small picture is that an independent firm (i.e. not an agency) has title to their clients and any adviser working for them does not, whereas an agency by any name is acting on behalf of a principal who has title to the clientele, and the agent does not.These scenarios leave the product provider out of the picture, of course, who could also legitimately claim that their policyholders are their clients since the essential contract is between them and the client, not between the agent or adviser and the client. RDR has crystallised this because now the contract between the client and the adviser firm is clearly quite separate from the contract between the client and the product provider.

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Duncan Carter 2

Feb 05, 2013 at 12:05

James Clancy is absolutely right but this is about hanging on to trail commission, not the welfare and best interests of clients. The acid test is when the client tells Towry etc, that they don't want to deal with them as is their right and choice and then disengages. Even more of a problem given the client can now turn off the trail tap.

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Feb 05, 2013 at 12:10

No one 'owns' a client. An adviser may very well be entitled to the agency relating to the business they have undertaken with their client(s) or purchased on acquisition of a client-bank. But clients are free to terminate this and follow whichever adviser they chose. And I'd like to see a judge rule otherwise.

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Sam De Zoysa

Feb 05, 2013 at 12:27

I too have always found the term client ownership an odd one. Along with the segmentation description of A, B and C clients. If you asked them which letter do you think they would asign themselves?

As for ownership, ultimately (in my opinion) service and results are hopefully going to determine where a client hangs his hat. If after years of doing the right thing a client wants to stay with the name that they know rather than the adviser they know, do you really want them as a client?

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Ric Green

Feb 05, 2013 at 12:35

Principals based contract. Yes that will work well.

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Bindair Dundat 2

Feb 05, 2013 at 12:40

Mr C is correct - no-one "owns" a client. It is about who has the marketing and servicing rights. The only winners in any dspute are the lawyers. If your clients have a relationship with the business as opposed to an individual adviser it is a non-issue in any event. There are enough High Court rulings already that can determine this. Client solicitation is almost impossible to prove - dealing with clients within a retrictive covenant period on the other hand is a different matter. Given there is a finite amount of adviser time available to support an ongoing F2F service if a few "clients" walk away with an adviser who leaves then so what? Pragmatism rules!

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salam ansari

Feb 05, 2013 at 12:47

Self employed advisers have traditionally built up their client banks? Its the Companies and Networks, who use their dominant role to try and have control on this client bank? The advisers, who are the weakest link are basically exploited by these entities? In a fair system the clients should remain with the advisers? Trail and subsequent income should be for our benefit? That would be a fair industry! any out come or principle needs to establish that?

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Philip Wise

Feb 05, 2013 at 13:16

I didnt see an announcement that TCF had been abolished. But maybe it's only been abolished for certain firms who only paid lip service to it anyway...

I'm amazed that the attendees are admitting to being there. Next time we compete with SJP or Towry Law, I'll be showing this story to the potential clients. Thanks Citywire! Can you list all the attendees?

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Dan Rear

Feb 05, 2013 at 13:23

Leave it to the Client and the Market to decide, for God's sake keep the Lawyers out of it.

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Simon Mackfall - MD Younion

Feb 05, 2013 at 13:25

I echo that the clients' best interests should be focus.

Realistically though, the objective seems to be to achieve a balance between the hopes and expectations (and 'rights') of:

* the current employer

* the advisor, though, still above all...

* the client (ideally having been providing with the facts!)

So... Might the client be sent a communication from their adviser's current employer, informing them of their adviser's departure, the date of such, and the agreed period for which their (former) adviser will not be allowed to contact them directly?

This would provide the employer with the opportunity to proactively engage with "their" client and stake their claim/assure their client/cement their relationship.

It would also provide the advisor with comfort that "their" client was not being left in the dark/ignored by them during the agreed period.

Moreover, it would treat the client as I would hope to be treated; respected for being able to make my own decision in light of the facts as they have been (kindly - and in a timely fashion) brought to my attention.

The best of luck to the group.

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Gordon Hay

Feb 05, 2013 at 16:10

Surely the single and only point here is what the IFA - Network / National contract states ? Its contract law and no protocal will have any impact unless all of the contracts are renegotiaited ?

Having been through this moving clients is relatively easy, even with an unhelpful Network, if the contract permits it.

I also don't like the term ownership, no one owns a client, they work for / with a client

Is there really a story here as they could equally agree that snow is blue and it wouldn't change the facts ?

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Ewart Matthias

Feb 05, 2013 at 18:03

In the 17th Century slavery was abolished and so no-one owns a human being.

The business written is owned I would have thought by the agency holder of that business with the provider. How can this be debated otherwise.

That said the client does business with whom they choose and a company restricting a former adviser just has to be restrictive practice, doesn't it?

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Feb 05, 2013 at 18:53


It is not slavery here. It is about a goodwill of a business. If you think one day you can sell your business and retire you should watch this space.

In my opinion there are enough law cases so the matter could be setlle quickly.

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Chartered Mark

Feb 06, 2013 at 08:56

"Network bosses hammer out client ownership pact"

It's all in the headline.

In other industries they call it a cartel. Financial Services call it a Protocol.

When the big players get to decide how the whole market fluidity and dynamics work, you can bet that their self interests will be best served.

They are running scared and will try to railroad a "protocol" that will effectively be a case of "You don't p*ss on my cornflakes, and I won't p*ss on yours." "As for the smaller players, and the individual IFAs, stuff them. The clients? They will do what they are told".

Welcome to the RDR world of the FSA.

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No one in particular

Feb 06, 2013 at 09:25

Although the US broker protocol was set up by the big advisory firms, it's actually the small firms who are the net beneficiaries, and the membership reflects this completely - it's made up mostly of small advisory firms and increasing rapidly.

Don't forget that the seven advisers in the High Court case were small businesses and they won against Towry.

What's more alarming is the move to implement non-dealing clauses among the large firms. WHERE IS THE FSA IN THIS DISCUSSION? In the US, the regulators got involve very early and ended up banning non-dealing.

Wake up FSA. It's your TCF duty!!

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simon chamberlain

Feb 06, 2013 at 09:33

what a joke, a group of "network" heads sitting around the table talking about who owns somebody elses client base . Guys if you havent noticed its your members clients not yours ! i thought networks provided compliance support and commission reconciliation , your members should be very wary when their network starts claiming client ownership .I think we all know where this leads , Honister, Inter Alliance, money portal etc etc

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Steve Young (Sense Network)

Feb 06, 2013 at 10:00

For clarity, not all Networks are engaged in this discussion. Sense remains true to the notion that clients belong to the member firm not to the Network. If a member wishes to leave (and very few of our members do), we will always agree to transfer the servicing rights and trail commission to their new home.

There are a couple of wider points here. Firstly, network members should make sure that they have effective contracts with advisers to ensure that individuals cannot take clients away. Secondly, in the event of a member firm ceasing to trade, the network may have an ongoing regulatory responsibility to service clients (e.g. drawdown cases) and, in those cases, will need to provide that service or introduce the client to an adviser who can provide that service.

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Susan Hill

Feb 06, 2013 at 11:17

Having industry agreed non solicitation and non dealing clauses doesn't fully address the issue. For example, in my case with that well known 'up market sales force' I not only have a 4 year non solicitation and non dealing clause, which I have to live with. But I have a further clause 'she shall not at any time, induce, persuade, attempt to induce or persuade any client to terminate, cancel, surrender, partially encash, allow to lapse or to otherwise alter any of the polices listed' It's the at any time that bothers me, this is a permanent restriction on moving polices. The up market sales force may be part of TISA and proposing shorter non dealing and non solicitation but they have a way to get round whatever they are signing up to. Put the client first and ask what should we be doing to treat customers fairly.

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Feb 06, 2013 at 11:33

When Sesame is sold, who ownes the clients? Will Friends Life expect to be able to sell the trail?

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No one in particular

Feb 06, 2013 at 11:41

No one owns the client. That's the point of the protocol - to put the client's interests first.

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Ex Sesame via mobile

Feb 08, 2013 at 10:07

When i left sesame 3 years ago there were no issues novating all my agencies away- in fact they have a dept to help

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Usually found sitting on the fence

Feb 08, 2013 at 15:45

@ Ex Sesame - That was 3 years ago, is it still possible to Novate post RDR?

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Rob Stevenson via mobile

Feb 09, 2013 at 08:58

Total waste of time. This is a commercial issue. There really is too much wasted money in this 'industry'.

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No one in particular

Feb 11, 2013 at 10:25

Of course firms want to protect their commercial interests, however non-dealing clauses are an investor issue ie they are not in the best interests of investors!

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