Please Help... Ugly Team Separation

I feel for you. Ok, you probably should hire an attorney that specializes in our industry. You could go to the HR department at your firm, and discuss the issue confidentially. There probably is some policy at the firm about your dispute, as this has happened many times before, at all the firms. Good luck.

Thanks BigFirepower,

Management is already involved at this point. We have been having separate discussions with management telling each side of our own story. My partner said to the regional director that our agreement was "If I ever left the team, everything would go back to them".... Real shocker I know. When I informed management about the whole vesting schedule, their response was "oh, well that changes things". I am just worried that management will not give 2 sh*ts about me and just reallocate my share to the remaining members and kick me to the curb. Since nothing is in writing, its basically my word vs theirs. Serves me right for trusting a business deal to a hand shake.

I did speak to one lawyer who specializes in representing financial advisors but to tell you the truth, he was a real prick and was willing to provide zero advice without $5,000 up front and $500/hr. I have no problem paying a lawyers fees but he was less than forthcoming when I asked what exactly could we go after and what could I potentially win.

Just wondering if anyone out there has ever gone through this before or if you know of a case/situation similar to mine and how it was settled? I have absolutely no issues with management or the firm at this point. Just want to leave the team.

Thanks in advance.

+1 on getting a lawyer who specailizes in our industry.

Past that, and this isn't going to help, how could you be that naive? Nothing in writing?

Lastly, how much production are we talking here? Your 5%? If you want to move and be your own person, then just do it! Your seven years experience will serve you well to get you up and running much more quickly than you think. it might be one step back to take many steps forward.

And, then there's this: No contract means no non compete. You've got the keys to the kingdom. And, you've got the dirt on your bastard partners. l'd cut a deal, leave the firm and compete for the business. If you are even worth part of of what ML was paying you, I'd be willing to bet you end up with substancially more than 5%.

Lastly, your kids are only young once. Do what ever you need to do to spend time with them now. If you can't work it out with ML and you aren't willing to jump to another firm, then quit and get a job driving a truck where you are home every night for dinner. Yeah, i'm serious! Even if it means lowering your lifestyle, time with your kids is more important than money.

Words of wisdom, BG.

Hi Everyone,

Thanks for the advice. Currently my 5% is ~$200M production. Most of the production is fee-based so a lot of it depends on the markets. Our book could be doing north of $4MM this year if we get some growth. Just to clarify my situation... My team and I left ML about 3 years ago for another BD. I am hesitant to move again because my last move was just 3 years ago. I also happen to like this firm and would like to stay here if at all possible. Hopefully, I will get more clarification from management this week. I just find it hard to believe that management can reallocate production as they see fit. If my partners and I cannot come to an amicable split, is it possible that the firm would fire me? I know our employment is "at will" but wouldn't they need some reason to fire me if my production numbers are good? These are the types of questions that I have which the lawyer was unwilling to answer without a retainer.

Thanks!

[quote=jfkayne]

Hi Everyone,

Thanks for the advice. Currently my 5% is ~$200M production. Most of the production is fee-based so a lot of it depends on the markets. Our book could be doing north of $4MM this year if we get some growth. Just to clarify my situation... My team and I left ML about 3 years ago for another BD. I am hesitant to move again because my last move was just 3 years ago. I also happen to like this firm and would like to stay here if at all possible. Hopefully, I will get more clarification from management this week. I just find it hard to believe that management can reallocate production as they see fit. If my partners and I cannot come to an amicable split, is it possible that the firm would fire me? I know our employment is "at will" but wouldn't they need some reason to fire me if my production numbers are good? These are the types of questions that I have which the lawyer was unwilling to answer without a retainer.

Thanks!

[/quote]

If you had to produce proof, of a verbal agreement, can you do it? Would former colleagues or management be aware of the arrangement? Were there emails or documents that floated around? Surely, in some way, there must be something out there.

BigFirepower

I have a handwritten note that shows my percentage of the business but nothing in writing that shows a vesting schedule of my share or a separation agreement. The hand written note is simply numbers showing where my 5% was going to come from (ie 2.5% senior partner, 1.5% next partner, 1% remaining partner). Unfortunately, there is a lack of formality in team formation among the wirehouses, unlike when independent practices are formed. At ML, all we had was a "team agreement" that had to be signed by the partners and all it showed was the production split. There was no formal document provided by the firm that would protect advisors in case of a breakup, death, disability... etc. At my new firm, they didn't even have a "team agreement" until now. Just recently they are requiring all teams to complete one. There was an issue in the firm where an advisor died and his family argued that they had rights to the revenue from his book or a multiple of the earnings. The team, which the advisor belonged to, argued the family had no rights to the clients or any of the revenue received after his death. I never got a clear answer from management as to the outcome of the case because I think they are avoiding it and it is still in court.

I have production reports from ML and my current firm that show my payout as a % of the total revenue but there is absolutely nothing in writing in terms of a partnership agreement here or at ML. Our agreement was literally made over a handshake. I also have reports showing my % of the business expenses that I have paid (also 5%). I understand that the law can be funny but it seems crazy to me to argue that my 5% is not equity in my team. All of my compensation has been tied to that 5% and I have shared equally in all expenses and suffered just as much as everyone else has in the most recent market decline. If it is not equity... Then it is the most backward form of salary that I have ever seen. From the other partners perspective it would be "heads I win tails you lose".

I wish I had more in writing... Unfortunately, I was an ignorant 23 year old kid who was stupid enough to trust people when it came to business.

Thanks

Hey, you don't have to apologize to me, or anyone. I got in the biz long time ago, at 24, and just like you I created a partnership nearly right out of the gate. I wound up losing a handshake deal there, but did get something, mostly to clear the guys conscience. I later got into another Junior role, but we separated under the agreement we had, but that was aided by a good manager that had brokered the deal to begin with. The old production run, etc, are helpful to you, along with the note. But, it mostly helps to get the others to fess up, and deal in reasonably good faith. That is what I'd stress to management, and this team, that you're willing to deal in good faith. You should at some point, ask HR and management, if you're eligible to take this to Finra Arbitration if necessary. That would let them know you are serious...  Are you particularly close to any of the clients, in case you need to fight for them?

I am going to just reply to your original question, and if someone already answered this than move on... I just don't have time to read all the responses here, although most of the charcters who repsonded are usually stand up chaps, IMO.

Anyway, I don't think that just because you don't have it in writing it's unenforceable. If you can establish that a partnership exists the first hurdle will be met. Bear in mind this can be done orally.Not recomended... but you know that now. Once a couple of your partners get a subpoena for a depo. or hearing, the truth usually comes out. Assuming everything you said here is true, you may be able to prove your case fairly easy. Show your contributions , expenses and capital put in, and further explain the other parties arrangements... it may be easier then you think.

If you can show, more likely than not, facts that show some sort of agreement or partnership existed, then proving the 5% shouldn't be that hard. Try to remember any past incidences wherein you did things that a regular FC w/ no partnership interest wouldn't do... (ie: marketing expenses, accounting, etc....)

GL

Maybe one day a handshake will mean something in this biz... as long as I've been doing this though, it's just a means to pass around germs...

[quote=jackofalltrades]

Maybe one day a handshake will mean something in this biz... as long as I've been doing this though, it's just a means to pass around germs...

[/quote]

HAHAHA.... Isn't that the truth. I appreciate all of the advice. I am going to gather all of the information that I can, which shows my share of the book. If we can't come to an agreed upon separation, I will certainly ask if it can be taken to arbitration. I hope we can come to an agreed upon separation without management intervention but I am not sure how considering we are on two opposite ends of the spectrum. I have never been involved with an arbitration can anyone provide some guidance......

1) Since I have no issue with my BD, would the arbitration be between my partners and me? I was not sure  because technically I am an employee of the firm.

2) In arbitration do you represent yourself or are lawyers involved?

3) Do you think there is any way to take this to arbitration and stay at the firm or am I just going to receive a buyout? If a buyout occurs, what happens to my clients?

Thanks again for the help everyone

[quote=jfkayne]

[quote=jackofalltrades]

Maybe one day a handshake will mean something in this biz... as long as I've been doing this though, it's just a means to pass around germs...

[/quote]

1) Since I have no issue with my BD, would the arbitration be between my partners and me? I was not sure  because technically I am an employee of the firm.

If you did not include your BD as a respondant then they would not likely be involved, although, you would need to verify this w/ a lawyer. I remember reading that Suze Orman, worked at ML (I think) and early in her carerr rolled over on a bunch of brokers and after an arbitration and firings she went on to have succesful years  w/ ML. Not saying this has anything to do w/ your situation but when I heard her tell the story I was shocked they kept  her. They were probably scared of the Whistleblower Laws. If I remember correctly she was like mini-regulator in her office turning everyone in. Ok sorry about the sidetrack....

2) In arbitration do you represent yourself or are lawyers involved?

I would definitely recommend a lawyer, there are various forms to be filed, discovery, answers, pleadings, etc. If it goes to arbitration it won't be cheap, but if you lose it won't be cheap either.

3) Do you think there is any way to take this to arbitration and stay at the firm or am I just going to receive a buyout? If a buyout occurs, what happens to my clients?

It's possible to stay on and with your own office. Your BD would likely want to see that you did everything possible prior to filing suit and of course that you acted reasonbly. Of course every one/ firm is different. If you get a buyout I would imagine your clients go to whoever bought them.

[/quote]

All this legal advice from non lawyers, hmmm?

If your plan is to sue somebody you need to hire an attorney. All, this talk of forcing their hand is akin to high stakes poker. You could tell them that you will take it to arbitration but don't be surprised if their reaction is 'See ya in court, don't let the door hit cha on the way out!"

That you are right doesn't matter.

yeah, I would hope that any legal advice posted here or anywhere on this site, will be rec'd as conjecture amongst industry know-it-alls and more likely than not comedy...

GET A LAWYER....

Good grief fellas, I don't see anyone above playing "lawyer"...

This kid is in a tough spot. There is no practical way for his employer to split the business to accomadate him. Would he take clients with him? Does he even work with clients? Looking at it from the client's pov which clients would he take? And, would they want to go? Or, would his employer just slice off a piece of the action and pay him. That, even though he would be at another office where he wouldn't be contributing to the team.

From a practical standpoint splitting the biz doesn't work. Best solution is for him to move closer to the office.

Big, even though the OP probably understands that we aren't lawyers, the key word there is probably.

The point from my last post still stands: OK, kid, you've got us by the short and curlies. YOU'RE FIRED!!!!

Being right as rain doesn't cut it in a 4mm vs 200k disagreement. To see a graphic representation of the out come go to Youtube and watch train vs car accidents. The part of the car is played by our hero.

It's just the reality of the situation.

I never understood this... so the team does $4MM and you get 5% of that(what do you do for that 5%?) So your production is 200k? So does your production hit the grid at 200k or 4mm?

Before management even became involved here is the offer that I made to my partners. I am very interested to get your thoughts as to if this is reasonable:

1) I remain a part of this office and continue to receive 5% of the revenue from our pool number (Only the original pool number).

2) We set up another pool number between the three remaining FA's, split however they want.

3) Any new business that I acquire goes into my individual FA number and I am responsible for all servicing. Any new business that my partners acquire goes into their pool number and they are responsible for the servicing.

4) I continue to support the office in my technology roles and I continue to service all of the clients in our original pool number.

5) Since I would not be adding additional revenue to the branch going forward, I would relinquish my share of the office profit sharing (5%). For clarification..... we have a deal with our current BD that if our production is X amount above our expenses, there is an additional profit sharing bonus.

6) I will give up my office since my $200M production for the branch does not warrant a nice window office in Princeton.

Once my partners rejected the proposal I presented it to the regional director. He said he is taking it into consideration and will follow up with me. I think this proposal makes the most sense rather than troubling the clients with having to make the choice of who they want to work with and avoiding the necessary paperwork to transfer their accounts to another office. At my current BD, there is a hell of a lot of paperwork involved no matter what you want to do so it is just going to be another burden on the clients (something they never asked for and a very poor level of service). Under my proposal:

1) Nothing would change from the clients perspective

2) The office would not lose any revenue

3) I would continue to service all of the relationships that I am responsible for and provide investment services for the other clients in the pool

4) Both my partners and I receive greater equity in our businesses going forward

5) I get the freedom to work more from NYC and eat what I kill.

6) My % becomes smaller as we both grow

Chickenfeed here is a list of the services I currently perform for the team:

1) Relationship management of about 30 households. (Some I acquired and some smaller relationships that were on the books and not receiving any service call it 20MM in assets total)

2) All technology for the branch (CRM systems, paperless office, all server maintenance.... etc)

3) Investment specialist for all proposals, hypotheticals and individual security research including financial statement analysis, concentrated stock hedging strategies.... etc (I am the only person in the office who is fluent with a Bloomberg machine so I am stuck answering all investment questions for the book and I am half way through the CFA program)

4) Individual equity account management. I built and maintain 4 equity models with approximately $50MM in them. It is run like a separately managed account for our clients, traded on a quarterly basis.

5) A whole lot of other stuff that I don't have time to list......

The bottom line is that in addition to wanting to be closer to my family, the team is not adding sufficient value to my practice. As it stands now, I only get 5% of the production of each account that I bring in (ie a $1,000,000 new account at 1% would pay me about $250 before tax per year!!!). I have a family in NYC and I am sure you can see how that is just not cutting it. In theory, as I bring in new accounts, I will get a bigger share of the total book. I am sure you can imagine after the discussions I have been having with my partners...... I don't exactly trust them to be fair when allocating me a larger %. The whole structure doesn't make sense and I just want out so that I can start to grow again.

From managements perspective, they should love this proposal. Nothing changes from the firms perspective and both groups can proceed with trying to grow revenue. If they fire me then it leads to legal battles and me joining another firm and trying to take clients away from my current BD. How successful will I be.... Who knows but I have been intimately involved with the book for 8 years and I know all of its weaknesses. I know this is primarily a relationship business but those relationships can be broken if you offer clients a tremendous value which they may not currently be receiving. Also, the clients never asked for any of this and I think its ridiculous to ask them to move again when they just moved to this firm. It is a huge burden for them considering we handle all of their cash management.

I really hope I don't end up being the car in the you tube video. I know the law can be funny at times but my partners know what they are doing is wrong. They have been flat out lying to management regarding the vesting schedule and I have been helping them grow this business for 8 years now. How can that be worth 0 and why am I the one getting forced out?

You're being forced out?

About the law, my take in posts aren't from a legal perspective. It sounds like you are getting screwed. My POV is based on reality. It's the senior team member vs you. Train-car. You will not win. However, you can sue and a few years from now you may get a settlement. The point being; being right doesn't help you. At least not much.

if you aren't being forced out why not move closer to Princeton? I live in South Jersey, about 35 minutes south of Princeton. I understand the culture shook aspect of a move like that, but we've got a lot of ex New Yorkers living here. They can't believe how cheap, relatively, the housing and cost of living is here. My across the street neighbor runs a school for law student wanna-bees  in NYC to help them pass the LSATs. She commutes twice a week into the city. She's thrilled at how her family's life style has changed with the move. Just sayin, NYC is a fantastic place, but people move for career reasons all the time.

Lastly, as i said, there may be practical considerations that prevent your employer from giving you what you want.

If you aren't being forced out, that is, if the choice is in your hands, consider moving your family.

I would consider moving to NJ if it were not for my wife and child. My wife is in the JPM investment bank at Chase Manhattan Plaza. She wants to continue to work so it is very important for her to be very close to home for reasons like nursing and child care. She works very hard and the time she does have with the baby is extremely valuable to us. We currently live directly accross the street from her office so she is able to come home at lunch and be with the baby. I certainly do not want to subject her to the commute of going into the city every day. Other reasons include closer proximity to her parents (Westchester) and all of our friends live in the city. Somehow we still lead very social lives with our friends .

JFK, just woke up (west coast summer work day at home desk)  and looked at  your post. Remembering how I started my biz in the year my child was born, and how the decades fly. If I was in your situation, after reading everything here, and knowing what I do now, I'd reconsider these words from above by BG:

And, then there's this: No contract means no non compete. You've got the keys to the kingdom. And, you've got the dirt on your bastard partners. l'd cut a deal, leave the firm and compete for the business. If you are even worth part of of what ML was paying you, I'd be willing to bet you end up with substancially more than 5%.

Lastly, your kids are only young once. Do what ever you need to do to spend time with them now. ( Become self employed, ie, independent.)

Consider doing the hard thing, break free, compete, thrive. Get your butt in gear and stop wringing your hands, this will be the hardest year of your life but there will be much time later on to go to the kid's soccer games and read the WSJ and think and write.

[quote=jackofalltrades]

Maybe one day a handshake will mean something in this biz... as long as I've been doing this though, it's just a means to pass around germs...

[/quote]

Wow, Hell will freeze over before that happens.

Sorry to hear about your team falling apart. But thanks for sharing maybe it will save someone else!

The advice your getting here from BG and Tenth, solid stuff. BG's analogy about trains and cars not only made me laugh, it's about as true/accurate as you'll possibly find. Hey, at least you have a dual income household... 

You've got two choices -stay or go. Either you or your wife should give up their job. You didn't mention who brings home more of the bacon. However, staying in Princeton, living someplace south of exit 5 on the turnpike will substancially reduce your living expenses. Not that it's cheap, just much cheaper. My house, located 80 miles north, more than doubles in price.  If wifey quits, there is a good chance you could make it on one income and your family has it's best outcome, one stay at home parent. You would be less than 30 minutes from the office, and close enough to the inlaws to make frequent visits. But, still far enough way to maintain sanity. And, beleive it or not Jersey isn't the end of the world. It's gotta lot goin' for it. If you don't believe me just ask Snooky and "The Situation!" Seriously, lots of good stuff here.

It's culture change, but you need to make a decision. People move all the time for career reasons. In this situation, you choice is career or living  location. Is living in NYC worth giving up a promising career?

OTOH, have you thought about getting your resume to other large NYC teams?

[quote=BondGuy]

And, then there's this: No contract means no non compete. You've got the keys to the kingdom. And, you've got the dirt on your bastard partners. l'd cut a deal, leave the firm and compete for the business. If you are even worth part of of what ML was paying you, I'd be willing to bet you end up with substancially more than 5%.

Lastly, your kids are only young once. Do what ever you need to do to spend time with them now. If you can't work it out with ML and you aren't willing to jump to another firm, then quit and get a job driving a truck where you are home every night for dinner. Yeah, i'm serious! Even if it means lowering your lifestyle, time with your kids is more important than money.

[/quote]

I see two excellent choices laid out above. If your partners are taking advantage of you now they will again. I would go indy/back to ML and fight your team for clients or call it a day and take the kids fishing...

Update… Thanks for all of the comments everyone. Management has been fully involved at this point at it looks like they are not going to be the proverbial “freight train” that I thought they were going to be. Quite the contrary, its seems like they want to stay out of it as much as possible.

Management came back to me and said even though they agree it is unfair to me, in the absence of a written team agreement, they are going to split all of the relationships up based upon who claims ownership of the client. Obviously there is going to be a lot of overlap between the clients that I think I have a right to and the ones my partners think they have a right to. Under that scenario, I end up getting screwed out of my % of the book. I asked management if we could settle this in arbitration, naming my partners as the respondent, not my BD. The manager came back to me and said that I have every right to argue my share in arbitration with my partners being named the respondent. He actually seemed quite relieved when I said that I would not be naming my BD in the case. He understood that the firm policy regarding team splits is not exactly fair in all cases and how I would want an independent 3rd party to be part of the decision

He then suggested that I go down the mediation route first. The problem is that mediation is not free, what is agreed upon is not binding and it is very possible that no agreement is reached and it ends up going to arbitration anyway. I have some questions for all of you and it would be especially helpful to hear from those reps that have gone through arbitration and mediation:

Sorry for the long post and thanks for any advice