Brewin Dolphin’s decision to sue rival firm Charles Stanley has received qualified backing from wealth management CEOs.
While supporting Brewin’s decision to protect its franchise, the CEOs also question whether airing their dirty laundry in public could prove damaging for the broader industry.
Brewin is suing six former senior employees from the office, known as the ‘Leicester Six’, alleging they breached their contracts and conspired with Charles Stanley to cause losses to their business. Charles Stanley has denied the claims and said it will ‘vigorously resist’ them.
The Charles Stanley defence document, exclusively revealed by Wealth Manager last week, exposed a list of grievances. These typify the tensions that exist in most large wealth management firms as they seek to centralise and become more profitable.
The Leicester Six’s complaints centred on Brewin’s move to a unified rate card, the imposition of an internal suitability review,
the allocation of costs of the FSCS levy and a new strategy to drive profitability.
Richard Whitehead, chief executive of Dart Capital, identifies with Brewin’s decision to protect its business, but questions the fallout for the broader industry.
‘You have to be seen to protect your own interests. The people that have moved wanted to leave which is fine and they should be allowed to do so, but not at the risk of breaking the terms of their past employment. Why they wanted to move has meant they have aired their dirty laundry, which is not healthy for the industry,’ he said.
‘It would have been better if they had kept it out of the public eye. These things are better dealt with behind the scenes. It is a shame the personal aspect has been aired so much by the individuals. It doesn’t show anyone in a good light.’
Ashcourt Rowan chief Jonathan Polin (pictured) said: ‘It is totally understandable that companies have to protect themselves, as we would against any movement of that number of people, but it is unfortunate the way the news has come out. From Brewin Dolphin’s point of view, they want to absolutely let people know that they are not going to take this lying down and will follow through.’
One chief executive from a medium-sized wealth management business, who preferred to remain anonymous, said the dispute typifies Brewin Dolphin’s journey, like others, to become more efficient and profitable.
‘We are almost witnessing an inflection point between an old style brokerage business and a modern, contemporary, professionally managed organisation and this is the fallout from it,’ he said.
He views Charles Stanley as a modern professional firm but feels some of the points raised in the defence, such as responding to the internal suitability review and the decision to focus on larger discretionary clients, are part and parcel of moving to a more profitable model.
The recruitment of teams to rivals and subsequent legal spats are nothing new in the industry, but what has proved most surprising is the decision to bring the dispute into the public domain via the courts. The exact motivations behind this are not yet known, as is often the case in litigation.
As well as feeling genuinely aggrieved on the merits of this specific case, Brewin Dolphin may view it as a warning to employees considering leaving, or to competitors looking to poach its staff.
‘These sorts of disputes are not unusual but court action is. It looks like Charles Stanley has decided to attempt to embarrass Brewin Dolphin by putting certain things in their defence,’ said Susan Hopcraft, a partner who specialises in dispute resolution at law firm Wright Hassall.
‘This is not unusual in litigation and no doubt Brewin Dolphin had its eyes open as to what happens when disputes become public in court proceedings.’