Robert Campbell Considers Significance of Towry Case for Financial Advisers

As Robert Campbell explains to New Model Advisor, at the heart of wealth manager Towry's recent spectacular defeat in its legal battle with Raymond James was its failure to distinguish between non-solicitation clauses and the stronger non-dealing clauses Towry imposes on its own advisers. Towry's case against Raymond James and seven former Edward Jones advisers who joined Raymond James was that they had solicited their old clients away from Towry.

Campbell, who represented Raymond James and the seven advisers, said the case highlights the difference between the two clauses and could lead to an upsurge in firms introducing non-dealing contracts for their advisers. But he also warns that firms could struggle to uphold these contracts if they were challenged legally.

"[A restrictive covenant] will only be deemed to be reasonable in so far as it protects someone's reasonable business interests," he said. "The more draconian it is, and clearly non-dealing is more draconian than non-solicitation, the more likely it is to be struck down as unreasonable."

In Campbell's view, the case contains lessons for those acquiring independent financial advisers and client banks, because it demonstrates that restrictive covenants should not be relied on to keep clients, and that advisers needed to focus on attracting clients with their proposition.

The case also shows, Campbell argues, that restrictive covenants do not prevent advisers from being able to move firms or clients following them, as long as these advisers seek legal advice and adhere to the correct processes.

"It's a very important message to take out of this," he said. "If you get timely and accurate legal advice at the outset, there is nothing to stop you dealing with your former clients and complying with contractual obligations." Read more.