Raymond James Investment Services, the UK private client arm of Raymond James Financial, is continuing its drive to encourage UK wealth managers to adopt a broker protocol similar to one existing in the US.

The Broker Recruitment Protocol is described as a restrictive covenant taking the wishes of clients into account when a financial advisor jumps ship. It was jointly created by Smith Barney, Merrill Lynch and UBS Financial Services in 2004 and 826 firms have now signed up to it, according to Raymond James. The firm listed Credit Suisse, Edward Jones and Charles Schwab as examples of companies that have opted out.

At a recent conference arranged by the Tax Incentivised Savings Association in the UK, Michael Alford, deputy general counsel of Raymond James’s US-based parent firm Raymond James Financial, said that the use of non-compete clauses similar to non-dealing clauses in the UK were inadequate as they “completely excluded the client from the equation”.

“If a client calls the financial advisor’s former telephone number looking for her, the client generally is simply told that she has left the company, without explaining why she has left or where she has gone,” Alford told the conference.

The protocol in the US is a three-page blueprint setting out specific procedures when an advisor has resigned. Alford describes it is a “forbearance agreement in which members consent to forego enforcement of restrictive covenants in recognition that the clients’ wishes should be the primary consideration.” In short, it is up to the client to stay with the firm or go with the advisor.

The costs of legal battles

Raymond James believes that the main benefit of a protocol of this kind would be a reduction in money spent on legal fees.

Earlier this year, Raymond James’s UK subsidiary won a legal battle against Towry, the UK wealth advisory firm. Towry had sued RJIS for client poaching from seven former Edward Jones advisors at Raymond James. “The judgment does support the efforts of professional services firms like ours, to protect their legitimate business interests, through contractual non-solicitation, non-dealing and confidentiality clauses,” Andrew Fisher, chief executive of Towry, said in a statement after the ruling in February.

“The contracts of the former Edward Jones employees were materially different to our standard Towry contracts in that they did not contain a ‘non-dealing’ clause and we are confident that our current Towry contracts afford us appropriate commercial protection,” Fisher said in the statement.

Peter Moores, chief executive of RJIS, has previously said when interviewed by this publication that he understands the importance of protecting commercial interests but that there are ways of doing it that also look after the interest of the client. “Some firms are saying that they need a respectable period of time to protect their legitimate business interest, which means that they want to get in front of the client and be able to present their story,” he said.

Some are skeptical whether a protocol such as the one in US would work in the UK. “I think it would take an awful lot for UK regulators to say to their members, ‘you must not impose restrictions on solicitations or dealings which may affect your customers’ right to choose to follow  a particular individual advisor who leaves your firm,'” Ronnie Fox, principal of Fox Solicitors, has told this publication.

“The tradition in this country has always been that if parties enter into an agreement which results in the choices for clients being restricted by their employer in the future, the court will pay more attention to the deal struck between the parties than to the rights of clients to choose their own advisors,” said Fox. “It is different in America.”