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The Towry/Raymond James court case round-up

As the court case brought by Towry against Raymond James comes to an end pending a decision in October, Sam Macdonald reports on proceedings.

The Towry court case against IFA firm Raymond James and seven former Edward Jones advisers concluded last week, bringing to an end five weeks of claims and counter-claims in Towry’s attempt to receive £6m in damages.

The case has seen allegations of solicitation, conspiracy and wilful commercial injury laid against the seven former Edward Jones advisers and their new employer. This was countered by allegations of aggressive and threatening behaviour by senior Towry staff towards EJ advisers, as well as claims of institutional dishonesty when describing the Towry proposition to clients acquired from EJ.

At the heart of the case is Towry’s submission that the seven former advisers broke non-solicitation clauses in their contract, which prevented ex-employees from contacting clients for up to 12 months.

In addition, Towry claimed the seven conspired with each other and their new employer Raymond James to break their employment contracts and wilfully damage Towry’s commercial interests.

The advisers in question had non-solicitation clauses in their restrictive covenants as part of their employment with Edward Jones. These covenants prevented them from influencing the clients to move with them should they leave the firm. These contracts would allow the clients to move with the advisers, providing it was the client’s choice.

After the acquisition, Towry offered the advisers contracts with non-dealing covenants, preventing them from working with previous clients from Edward Jones for a 12-month period, which the seven advisers turned down.

During the hearing, Towry alleged a pattern of behaviour had emerged to suggest that solicitation took place, highlighting the “remarkable” volume of clients that transferred to RJ following the departure of the advisers.

In total, 388 clients with assets totalling £33m subsequently joined RJ. At the time of the acquisition of EJ by Towry in 2009, EJ employed 459 advisers and advised on assets worth £1.5bn.

Towry said the ex-EJ advisers misunderstood the non-solicitation clause by assuming this rested on who was responsible for initiating the first contact between adviser and former client, that some of the advisers had “sounded out” which clients would follow them if they left, that some advisers had compiled a list of core clients to target and that it “is overwhelmingly likely” that confidential client details were passed to Raymond James.

In his opening submission for Towry, Adam Tolley, QC, said: “Wrongful conduct has caused very significant losses, amounting to nearly £6m, for which it seeks damages”.
In response, the seven advisers and RJ claimed Towry’s behaviour towards advisers and clients acquired from EJ had the effect of rendering the contracts void.

The advisers said the quality of the service from Towry is so different to what they were being offered by EJ that it is no surprise large numbers of clients left and that the claim by Towry that stated otherwise is “institutional dishonesty” on the part of the firm.

The advisers claimed that giving only seven days to former EJ advisers to consider the new terms of employment from Towry was a repudiatory breach of contract and that, in effect, Towry’s actions broke the contract first.

The ex-EJ advisers said Towry chief executive Andrew Fisher was dismissive of the new employees and belittled the service they offered their clients, saying they were not acting as advisory stock-brokers but simply selecting stocks from a list drawn up by EJ management.

Former EJ adviser Barry Bennet said Fisher displayed “an aggressive, patronising, threatening and rather offensive attitude” in his dealings with former EJ employees.

The advisers also claimed Towry was acting as the “enemy of consumers” by use of a non-dealing clause, as it effectively prevented clients from exercising freedom of choice.

Towry’s Fisher defended the business’s actions under cross-examination and said: “Towry is looking to do the best for consumers through its people, its infrastructure and its training. In order to be able to do that without suffering from unfair commercial interference, we enter into contractual arrangements with our employees.

“The reason it is 12 months is because we feel that gives us enough time to explain the proposition, what we do and cement our relationship without the client going elsewhere and ending up in the wrong place as we see it.”

However, RJ and the former EJ advisers claimed the service offered by Towry to its new clients was far from being in their best interests.

Under cross-examination, Towry head of client proposition David Middleton said it was “a reasonable project assumption” that all assets acquired from EJ would be transferred to Towry’s independent investment management service.

But Chris Quinn, QC, acting on behalf of the defendants, said the assumption that all the assets would be moved to the IIM was based not on their clients’ needs but was “an asset grab” based on the need to gather sufficient assets under management to support a flotation for Towry.

Quinn said the target valuation of £7 a share would see the company worth somewhere between £750m and £800m, with Fisher’s 20 per cent stake worth £120m and many of the senior directors seeing windfalls of several million pounds.

A decision on the case is not expected until October.

The Towry allegations

  • The seven advisers solicited up to 388 clients worth more than £33m to move with them to RJ in breach of the non-solicitation clauses in their EJ contracts.
  • Towry losses totalled £5.8m in lost business as a result of this solicitation.
  • RJ conspired with one or more of the advisers to breach their contract.
  • RJ offered inducements to seven former EJ advisers to breach contracts.
  • In three separate instances, advisers conspired with each other to breach their EJ contracts.
  • Advisers used confidential client information to solicit business and it “is overwhelmingly likely” this was passed on to RJ.

The defence:

  • Towry has failed to provide any evidence of unlawful solicitation and has based the claim “on paper-thin inferences”.
  • Towry was in repudiatory breach of contract with EJ advisers by allowing only seven days for new employees to agree terms before having employment offer withdrawn.
  • Towry planned merely to “churn” all EJ assets into independent investment management service.
  • Towry executive committee members have acted dishonestly to claim that Towry and EJ propositions are similar.
  • The two propositions were so different it was unlikely that those who wanted EJ service would be willing to move to Towry.
  • Towry chief executive Andrew Fisher was arrogant and threatening to EJ advisers following Towry acquisition.


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There are 5 comments at the moment, we would love to hear your opinion too.

  1. So Towry “lost £33M of client assets” and then claim £5.8M of lost revenue.
    That works out at 17.5%
    I knew they were expensive but that is riduculous.
    No wonder platforms make their owners such vast sums.

  2. @Kevin.

    It was 1% per annum of £33m x 17 years which is Towry’s calculation of the lost revenue they will now suffer and the time period they believed they could retain the clients for!

  3. Wonder what the average investment term is for clients currently on the TL books? If it’s 17 years, then the figures at least stack up, but I very much doubt it. Also, what value their 1% in light of the market fluctuations we are currently seeing, and conversely when the markets rise? A complete shambles from start to finish. Porches for the solicitors and barristers me thinks, and nothing for anyone else. What a wonderful profession we are in. Good summary though.

  4. That is the problem with working for someone else. You spend years building up the client bank for someone else. Unless you get shares in the business, you get jack if it is sold.

    If it is a hideous company, then you are stuck. You can leave, but you have to start all over again. Employed financial advisory status has never really made too much sense, unless you are offered said shares.

  5. Towry Raymond James court case.
    Have I missed the decision expected in October???

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