Howard Diamond Quoted
By Lisa Shidler
A rash of recent lawsuits filed by wirehouses against breakaways are bad news for advisors — even though they ultimately achieve their objective of independence.
Though many of these cases get settled within six weeks, they still cause massive headaches for advisors because they eat up their time, making it harder to recruit clients.
Both of these cases left a small window of opportunity for a lawsuit, says Howard Diamond, managing director and general counsel of Diamond Consultants LLC. “If firms see a loophole, they’ll go after it. You’re talking about a lot of money sitting across the table,” Diamond says. “This is being used as a scare tactic. When we’re seeing larger teams, they do ask about this. But the message here is to follow the protocol and don’t be a wiseguy.”
Wirehouses, Diamond says, are less likely to file a lawsuit against those advisors who follow this advice — and a good measure of discretion doesn’t hurt.