Prudential Securities brokers will soon be signing their first non-compete agreements. Now in the hands of branch managers, the mandatory agreements prohibit any departing broker from contacting inherited accounts. Brokers still will be free to contact all accounts opened on their own.
The non-compete targets accounts that are formally distributed to brokers by branch managers when a broker leaves the firm.
It should be known to all that these accounts belong to the firm, says a West Coast branch manager. The account didnt come from the brokers own work.
While other firms limit their non-competes to six to 12 months after a departure, Prudentials agreement doesnt specify a time period, branch managers say. That means brokers theoretically agree to never contact an inherited account.
I have my doubts that the non-compete will hold up in court, says the West Coast manager.
This manager disputes reports that the agreement is a response to high turnover. Broker turnover is actually low right now, he says. The reason for doing a non-compete now is simply that everyone else is doing it. We dont want other firms to use it as ammunition.
Brokers havent yet been told about the non-compete. But one Midwestern Prudential broker says it makes sense for the firm to keep brokers from taking inherited accounts with them, since they clearly belong to the firm.
Prudential wont comment on the non-compete agreement.