Corporate & Securities Law

SNSFE Cautions Against Transitioning Reps Relying Upon Edward Jones' Oral Promise That It Would Not Seek To Enforce Its Written Covenants Not To Compete

By James Eccleston

For Edward Jones, wirehouse shrinkage spells opportunity.  That's according to an InvestmentNews article. Reflecting the deep changes that the current slump has brought to the securities industry, wirehouse brokers are starting to look to Edward Jones for shelter from the storm.

But because it has a long history of training its own reps and never has offered upfront money, it's no surprise that Jones hasn't always been successful in attracting disaffected wirehouse brokers.  The paper says that may change.

To better attract new recruits, Jones this year revamped its transition package to give new hires a steady income during the transition period. The new transition plan is designed to ensure an income of up to 12 months while recruits get settled in.  A recruit gets one month of income for every $10 million of assets controlled at their old firm.  That amount is based on 40% of trailing 12-month's production.

Jones' transition package also offers a $2,000 bonus for every $1 million in assets transferred in, and during the second six months at the firm, Jones will pay an extra 20%, 30% or 40% of production to recruits who produce at least half of what they generated at their old firm.

That said, be careful with respect to what the firm is telling brokers regarding non-competition.  Let's say the marriage doesn't go as planned.  The firm says that it DOES have a non-competition agreement for brokers who bring over an existing book, but "we're not going to handcuff them" if they want to leave.  Jones readily admits that sometimes it DOES sue brokers who leave. 

Let's be clear, when we negotiate these agreements, we're not going to rely on oral promises in the hopes that a written provision will not be enforced.

Those reps seeking to move to Edward Jones should seek legal assistance from attorneys at SNSFE who negotiate these deals.

Source: InvestmentNews

Full post as published by FinancialCounsel on March 10, 2009 (boomark / email).