Financial Advisers' Restrictive Covenants Are Hard to Enforce, Alex Denny Tells IFAonline

The defeat suffered by wealth manager Towry against its rival Raymond James in a case that focused on the enforceability of financial advisors' non-solicitation contracts has sparked fresh calls for industry consensus on restrictive covenants.

Commenting to IFAonline on the aftermath of the Towry/Raymond James legal wrangle, Alex Denny notes that restrictive covenants—clauses that impose sanctions on employees leaving a company—are common in many industries, but those in financial services are particularly difficult to enforce.

"Employers have to demonstrate the protection of what is known as a legitimate business interest," he said, such as preventing the loss of confidential data.

Even the more draconian ‘non-dealing' clause usually becomes void after 12 months, allowing advisers simply to wait a year before contacting their former clients. Read more.