A UK trade body is looking at whether to adopt a broker protocol covering movements of advisors between firms, amid recent legal tussles about the effectiveness of non-solicitation and non-compete clauses in work contracts.

The UK’s Tax Incentivised Savings Association will consider whether the US broker protocol covering the movements of advisors between firms can be adopted in the UK market.

TISA has set up an executive committee to drive the project and is seeking nominations from larger IFAs, banks and building societies, restricted advisory firms, wealth managers, private client stockbrokers, discretionary investment managers and trade bodies.

The first meeting of the committee is expected to be held in September.

TISA recently arranged a conference called When advisors leave, who owns the client?, where delegates are reported to have questioned the robustness and enforceability of non-solicitation and non-compete clauses in the agreements that advisors may have with their employers.

At the conference, it was pointed out that in the US the volume of litigation around this issue has declined sharply after the introduction and widespread adoption of advisor protocols.

Protocol

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.

“The seminar highlighted that the current arrangements create uncertainty for firms, advisors, providers and most important of all, clients. TISA was asked to look into the American protocols and determine whether they could be adapted for use in the UK market, or otherwise, how the current situation could be ameliorated,” said Malcolm Small, director of policy at TISA.

One firm that has been pushing for the US approach is Raymond James Investment Services, a UK subsidiary of Raymond James Financial. Earlier this year, Raymond James’ UK subsidiary won a legal battle against Towry, the UK wealth advisory firm. Towry had sued RJIS for client poaching concerning 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.

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

“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.”