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
The new financial year has got off to a strong start in adviser gains, helped by new entrants, after heavy losses sustained in June.
Michael McCorry, chief investment officer at BlackRock Australia, has detailed how investors are reconsidering their 60/40 portfolios as macro uncertainty highlight the benefits of liquid alternatives.
Having reset its market focus to high-net-worth advisers, Praemium’s administration solution has been selected by Bell Potter in a deal that increases the platform's funds under administration by $6 billion.
High transition rates from financial advisers have helped Netwealth’s funds under administration rise by $3.7 billion in the fourth quarter of FY25.
