A series of recruiting disputes between Ameriprise Financial Services and LPL Financial could help clarify what client data advisors are allowed to take, and the client contact they're allowed to make, when switching firms.
In a spate of recent lawsuits, Ameriprise accuses LPL of encouraging recruits to breach industry rules and abscond with the firm's client data, while LPL counters that a "bleeding" Ameriprise aims to use litigation over client information to stifle industry competition.
Advisors under the impression that they "own" their client relationships at independent broker-dealers may find the cases especially relevant, as this concept comes into play.
Ameriprise in recent months has taken LPL and advisors to court, seeking temporary restraining orders pending Financial Industry Regulatory Authority arbitrations over client information that the advisors brought with them when they moved from Ameriprise to LPL.
These disputes at FINRA and before courts touch on issues that affect the industry beyond Ameriprise and LPL, a lawyer who represents registered investment advisors and breakaway brokers told me recently.
Corey Kupfer, founder and managing partner at Kupfer PLLC, cited "a bigger conversation in the industry" involving platforms that give advisors the idea that "you own your clients."
Kupfer said Ameriprise has been more assertive recently in enforcing policies against advisors who are leaving.
Claim: Confidential Data Misappropriated
In one complaint filed this year in U.S. District Court for Southern California, Ameriprise alleges LPL has repeatedly misappropriated its confidential information through recruits, including Social Security numbers; account numbers, values and information; routing numbers; and other prohibited data.
LPL encourages advisors to abscond with confidential client information and trade secrets, violating federal, state and industry regulations, the Ameriprise Financial complaint alleges.
In 2024 alone, at mid-year, LPL had added nearly 800 registered representatives industry-wide, with only a small percentage coming from Ameriprise, but a large percentage of those Ameriprise advisors have engaged in similar misconduct, Ameriprise alleges.
LPL encourages advisors to abscond with substantial client documents and confidential client information well beyond that permitted under the industry's broker recruitment protocol, Ameriprise alleges in the suit.
The broker protocol, among other provisions, allows advisors switching between signatory firms to take only five items related to client information: a customer's name, address, phone number, email address and account title.
An LPL executive told the court the firm offered recruits a "bulk upload tool," not in use since Dec. 31, 2021, that did allow advisors to provide information beyond the broker protocol, but said the firm expected recruits to share only data that they, in consultation with outside counsel, deemed appropriate and in line with obligations to their previous firms.
Restricting Competition?
LPL accuses Ameriprise of abusing the courts and trying to chill competition for financial professionals and clients. It called the California case "a public relations stunt masquerading as a lawsuit."
LPL also contends in court that "Ameriprise is engaged in a pattern of serial litigation against the advisors who choose to leave Ameriprise, in an ineffectual attempt to stem the bleeding caused by its own anti-advisor and anti-competitive positions."
In another case, filed in Washington State last month, Ameriprise sued LPL and longtime advisor Douglas Kenoyer, alleging he improperly solicited his clients to move assets to LPL before changing firms in September, violating the broker protocol; many customers have followed him, the complaint says.
Kenoyer, in soliciting his Ameriprise clients post-switch, relied on confidential information misappropriated from Ameriprise, his former firm alleges.
Kenoyer fired back, arguing the complaint "is just the latest salvo in an economic war Ameriprise is attempting to wage against its competitor, LPL Financial, … and its former financial advisors for electing to resign from the company and move their practices to LPL."
LPL calls the Ameriprise allegations meritless and contends its competitor's "extraordinarily broad and draconian request to restrict LPL's business … would gravely harm advisors, their clients and the competitive market for advisor services."
The judge in the Kenoyer case, however, has granted Ameriprise a temporary restraining order against the advisor and LPL, requiring them to return all confidential, proprietary and trade secret information and enjoining them from further misusing the information.
The order prohibits LPL and Kenoyer from soliciting current Ameriprise clients whom the advisor had serviced.
