January 9, 2023
Louis Diamond Quoted
by Glenn Koch
The Federal Trade Commission last week proposed a rule that would prohibit employers from imposing noncompete contracts on workers.
The agency estimates that the rule, if enacted, could bring about $300 billion in additional pay for as many as 30 million working Americans. It could also make it easier for advisors who are currently subject to these agreements to switch firms.
Louis Diamond, president of advisor recruiting firm Diamond Consultants, says that he rarely sees noncompete clauses in advisor deals at wirehouses and broker-dealers. The proposed rule’s hands-off policy regarding non-solicitation agreements leaves most such advisors in status quo, he added, noting that these firms have other ways of hindering advisor movement.
“The firms, they can restrict movement by making it harder for advisors to move their books. We see it at certain firms, like Merrill, for instance, where they’ll offer free [account] fees for a period of time, and they’ve ratcheted up the pressure when advisors leave,” Diamond said.
“That’s a deterrent to move. The sheer work: It’s repapering, so it’s all new account numbers and account documents, and everything kind of has to be reset,” Diamond added.