Court rules client poaching out of bounds
The Supreme Court of New South Wales has reinforced the value of employment agreements, upholding Koops Martin Financial Services’ actions to stop a former adviser from luring clients across to rival dealer group ComCorp.
“We had an employment agreement with a restraint of trade component that the employee couldn’t act for a period of 12 months to entice any clients who he had acted for in the preceding 12 months,” Koops Martin director Stuart Malouf said.
“The court held that the restraint was reasonable and fair in the judge’s summary,” he explained.
Malouf said the process employed by former Koops Martin adviser Dean Reeves was fairly active and involved activities such as advertising.
“It was only a small number of clients who started to move and we immediately commenced action [in December, 2005] and received an undertaking that ComCorp wouldn’t continue to attempt to entice clients away, and with any client that actually approached them, we would be given five days clear notice to talk to that client,” he said.
Malouf felt the decision reinforced his organisation’s professional services model, which puts the practice above each individual adviser in terms of importance.
“We’ve always marketed that the client is serviced by Koops Martin and not by the individual. If an adviser leaves then a client may meet with a new adviser, and if there is a conflict between personalities there is always another adviser available,” he said.
The ruling bolsters a recent Federal Court decision that courtesy calls made by a financial planner informing her clients of her impending departure from her current dealer group constituted “enticement pure and simple”.
In that case, Angela Manning, a former AMP planner, was found to be in breach of her fiduciary duties when she called her clients to give them her new contact details at Goldman Sachs JBWere before her employment term with AMP had finished. Eventually, 75 per cent of her clients moved with her.
However, the presiding judge ruled the plaintiff, AMP, could only recover losses relating to Manning’s four-week notice period subsequent to her resignation.
Recommended for you
AZ NGA has entered into a strategic partnership with national advice firm MiQ Private Wealth, as a way to provide a succession solution, as well as career development opportunities for staff.
While the advice profession struggles under growing operating costs, Adviser Ratings has found more than half of practices – some 58 per cent – that generate less than $250,000 in revenue report no profit at all.
The Federal Court has ordered the freezing of assets and the appointment of receivers to two entities linked to Australian Fiduciaries, ASIC’s latest move in an ongoing investigation into the company’s managed investment schemes.
Off the back of the August adviser exam results, the profession has seen 17 new entrants hit the Financial Adviser Register (FAR) this week, helping numbers return to positive territory.
