Non-Solicitation Clauses Give Employers Little Protection, Alex Denny Tells FA Adviser

The defeat of wealth manager Towry in its case against Raymond James in London's High Court should, according the opinion column in FA Adviser, serve as a reminder that clients are neither owned by any company nor wish to be owned.

Following Towry's acquisition of Edward Jones in 2009, several Edward Jones advisers left to join Raymond James, and a significant number of clients followed them. The issue at stake in Towry's case against Raymond James was whether these advisers violated the restrictive covenants in their contract by "taking" the clients with them to another firm.

Clauses in employment contracts barring ex-advisers from soliciting or dealing with former clients can protect firms to some degree, but if clients want to move, it is ultimately their right to do so. FA Adviser columnist Kevin O'Donnell cites Alex Denny's contention that a non-solicitation clause on its own gives an adviser's former employer little protection in such cases.

"In this case, the advisers had enforceable non-solicitation restrictions in their contracts, they complied with those restrictions, and the clients still transferred their business," Denny said. "As obvious as this may seem, if you want to stop an adviser from dealing with their clients, you need to have a properly drafted ‘non-dealing' restriction."