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Towry case will spark more non-dealing clauses in adviser contracts

Law firm Faegre Baker Daniels says more firms will look to impose non-dealing clauses in their adviser contracts in the wake of the Towry V Raymond James High Court case this week.

Faegre Baker Daniels, which represented Raymond James, says the case illustrates the clear distinction between non-solicitation and non-dealing contract clauses.

Litigation partner Robert Campbell says: “In order to prove breach of a non-solicitation clause, the evidential burden is far greater than it is in relation to a non-dealing clause.

“It may be that one of the results of this judgment is that employers will seek to impose non-dealing clauses rather than non-solicitation clauses. In this case there were non-solicitation clauses in place but a very significant number of clients migrated away from Towry to Raymond James without breaching those covenants.”

Towry chief executive Andrew Fisher says: “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.”

Raymond James head of business development David Hazelton is working through his role at the Tax Incentivised Savings Association to form an industry consensus on restrictive convenants.

He says: “There are a lot of vested interests here. There are the advisers who have the view that they are under covenants that are too strict and should be less onerous, while at the other end there are consolidators that are buying businesses for lots of money and want to be able to keep the clients.”


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There are 6 comments at the moment, we would love to hear your opinion too.

  1. More money for the Lawyers!
    When you look at all the contracts flying around the place you will realise just who is making the money!!
    Most of them are very much in favour of the company who pays for them.
    What about the representative Bodies-why cant they put together a contract that protects their members properly,or is this asking too much?
    From my own experience I have been ‘stitched up’ on a couple of occasions.
    Towry law-Nice people to deal with by the sounds of it! NOT!

  2. I have also fallen foul of this in the past. I would suggest that advisers refuse to sign any such contract. If everyone took that stance it would no longer be an issue.
    Ultimately the clients will deal with whoever they want to anyway!!

  3. Why have covenants at all?
    Advisers need to earn a living & cannot be prevented from doing so. Shops dont own their clients so why should the financial services industry be any different? People buy people & the relationship the client has with the adviser should be more important for the continuity of advice.Clients should have the freedom of choice as to who they do business with and they are not concerned with who’s name is at the top of the letterhead.As someone who is restricted by covenants I find it all rather tiresome & unnecessary & feel for my clients when I tell them I cant do business with them because of the silly rules imposed on me.

  4. As an ex advisor of Edward Jones, it became very clear that they wanted not necessarily the advisor but wanted you to the sign away the access rights to the client bank you had. Then once they were “their clients” if you left and recontacted them they threatened you with this type of court action. Nice way to do business.

  5. R01 – Compliance

    question 101:

    Who owns the rights to decide whether an adviser can speak to a client?


    a: the client

    b: the advising firm

    c: the adviser

    d: go to court and let a judge decide

  6. I’m not a lawyer, but logic suggests that a clause in a contract that effectively bars clients from appointing as their adviser whomsoever they wish runs somewhat counter to the best interests of the client. Then again, from my experience, logic and the law often don’t appear to walk hand in hand.

    As Richard Wright suggests, you could refuse to accept a contract that seeks to impose such a blatantly restrictive covenant but if you’ve had three job offers and all the firms in question are trying to impose the same contract terms, you’re a bit stuck, aren’t you?

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