Big firms are using TROs to slow or even “scare” departing teams. Yet advisors who follow the right legal steps can neutralize that risk and move with confidence.
If you’ve followed industry headlines lately, you’ve seen the pattern: more firms filing TROs and lawsuits against advisors who decide it’s time to move on.
Merrill’s recent lawsuit against the $129B team that launched OpenArc Corporate Advisory. UBS’s action against a $1.4B Florida team that joined Elevation Point and another against a $1.2B Michigan team that joined RBC. And reports of other firms aggressively seeking TROs to restrict advisors from contacting clients in the days and weeks after they resign.
At first glance, it’s unsettling. But while the headlines are real, the truth for most advisors is more reassuring: those who plan carefully and work with the right counsel can move cleanly and confidently.
Why We’re Seeing More TROs
According to attorneys Michael Bressan and Jarrod Malone of the national law firm Shumaker, who joined me on a recent episode of The Diamond Podcast for Financial Advisors, the surge in TROs is part of a cyclical pattern.
“There was a lull during COVID,” Malone explained. “But over time, advisors started pushing the boundaries of what they could and couldn’t do. Now firms are cracking down, particularly on confidentiality of client information.”
The two note that data privacy regulations have also contributed to the rise. As states pass tougher data protection laws, firms have become more vigilant about preventing any unauthorized transfer of client information.
And there’s another factor that can’t be ignored: perception. “When a major firm wins a TRO against a big producer, it sends a message,” said Bressan. “It gets advisors’ attention. There’s definitely a deterrent effect.”
From what we’ve seen at Diamond, most TROs are more about optics and retention than about stopping legitimate client movement: a way for firms to make an example rather than make a case. Clients ultimately have the freedom to choose their advisor, and the firms know that. But they also know that even a few days of uncertainty can have an impact.
When Firms File and Why Prepared Advisors Prevail
The first step for a firm after a large team resigns is typically to review every email, call log, and file download in search of evidence that the departing advisors took data or pre-solicited clients. If they find anything questionable – or if the departure was politically sensitive – the firm may seek a TRO.
But the outcome depends heavily on how the departing advisors handled their move.
“The cases that go sideways are almost always the ones where someone cut corners,” Bressan said. “Maybe they took more data than they were allowed or called a client before resigning. Those are preventable mistakes.”
Contrast that with OpenArc, the former Merrill team that won a swift victory after Merrill sought to block their transition. “OpenArc did everything right,” Malone said. “They hired counsel early, followed the advice to the letter, and had a meticulous plan. That’s why the judge ruled in their favor almost immediately.”
Their case illustrates an important truth: firms can file a TRO, but they can’t win if advisors have played by the book.
The Most Common Missteps and How to Avoid Them
For every successful transition, there are cautionary tales. Malone and Bressan have seen it all: advisors photographed taking client files out of the office, pre-soliciting loyal clients, even emailing themselves account data “just in case.”
“Taking information you shouldn’t take is the single biggest mistake,” Malone emphasized. “It can violate not just your employment agreement, but also FINRA’s rules. And the regulator has been cracking down.”
He recalled one case where an advisor mailed every client a copy of their latest account statement before leaving, hoping to re-create records later. “FINRA viewed that as a privacy breach,” he said. “They fined and suspended him.”
Pre-soliciting clients – no matter how close the relationship – can be equally damaging. As Malone noted, “Even telling a long-time client that you’re planning to leave can trigger a violation if you haven’t yet resigned.”
The attorneys’ guidance is simple but vital:
- Engage counsel early.As Bressan put it, “Hiring an attorney a week before your move is like calling a plumber after the basement floods.” He’s right. The earlier counsel is involved, the more control you’ll have and the fewer surprises you’ll face.
- Understand your agreements.Every firm’s contract is different. Knowing exactly what data, notes, or client information you can take (and what you can’t) is critical.
- Be mindful of the optics.“Don’t clean out your desk,” Bressan advised. “Even if it’s full of charity minutes and golf tees, an empty drawer looks suspicious.”
- Stay patient and disciplined.“If you’ve built great relationships, clients will follow,” he added. “You don’t need to cut corners to make that happen.”
Why Legal Guidance Is a Necessity, Not a Luxury
It’s tempting for advisors, especially those confident they’re “doing nothing wrong,” to minimize legal preparation. But that’s a costly risk. “An ounce of prevention is worth a pound of cure,” Malone said. “You can’t always stop someone from suing you, but you can make yourself a hard target.”
The truth is, no one can prevent a firm from filing a claim. They have legal teams at the ready and deep pockets to see it through. But advisors who have a clean process and credible documentation of compliance are positioned to win quickly and to protect their reputations in the process.
As I shared on the podcast, the cost of strong legal preparation is small compared to the potential downside. Too many advisors have tried to save a few thousand dollars by skipping counsel or using a family friend, only to find themselves embroiled in expensive litigation that could have been avoided.
Moving with Confidence
There’s no denying that TROs and transition lawsuits are back in the spotlight. But they’re not a reason to stay put; they’re a reason to be prepared.
Advisors who take the right steps, hire experienced counsel, and follow the guidance of professionals who specialize in advisor transitions can move without fear. As OpenArc’s case proved, doing things the right way doesn’t just protect you—it can make you virtually untouchable.
Because in this environment, confidence doesn’t come from luck. It comes from preparation, discipline, and expert guidance. And that’s how advisors protect their business, their clients, and their peace of mind.
