Edelman Financial Engines filed a lawsuit Friday against Mariner Wealth Advisors, accusing the smaller RIA of luring away Edelman’s financial advisors, defaming the firm and incentivizing them to break employment contracts and steal trade secrets to solicit their clients.
The suit claims Kansas-based Mariner has, to date, recruited 10 Edelman advisors, prompted “hundreds” of broken employment contracts, and stole 851 former Edelman clients representing some $621 million in assets. Mariner manages $114 billion.
The suit accuses Mariner of an "ongoing scheme" to recruit Edelman financial planners with “high-power pressure tactics.” That includes allegedly telling Edelman planners that “everyone is leaving” the $245 billion RIA, it is a “sinking ship” and they’ll be out of a job if they choose to stay.
"In an effort to foment anxiety and pressure Edelman employees to accept a position with Mariner, Mariner agents have also falsely stated that, because of Edelman’s allegedly failing business 'everyone is jumping overboard' and have rhetorically asked 'do you really want to be the last planner standing at that firm,'" according to the defamation charge contained in the lawsuit.
The statements are “patently false,” according to Edelman's complaint.
“Firms at the top of their industries often find themselves the focus of third parties that prefer to take illegal short-cuts rather than grow a business through their own innovation and organic efforts," said a spokesperson for Edelman Financial in a written statement. "The complaint we filed today describes in great detail a prolonged pattern of deceptive actions used to steal EFE’s confidential and proprietary business information, mislead our employees, and misappropriate our clients and the assets we manage for them. We are taking this step to put a stop to these unlawful practices. We plan to litigate this matter vigorously in order to protect the significant investments EFE makes to grow business and provide our clients with the security, privacy and superior investment advisory and financial planning services that they have come to expect from us.”
Representatives of Mariner Wealth Advisors could not be reached prior to publication.
In its complaint, Edelman claims its business model is “unique” in that it provides its financial planners with prospects procured by spending “millions” on marketing campaigns, including through podcasts, webinars, publications, and newsletters.
“Mariner lacks the resources, infrastructure, and ability to make the tens of millions of dollars in investments Edelman makes each year on identifying clients with the ability to invest. Mariner has therefore decided to free-ride off Edelman’s multimillion-dollar investment by purloining Edelman’s trade secrets, goodwill, and client relationships,” according to the suit.
The suit cites eight former Edelman financial planners who were recruited by Mariner at various points over the past two years; in each case, Edelman claims Mariner prompted them to violate client confidentiality agreements. They were asked for clients’ AUM to create compensation packages for the advisors and solicitation plans for the clients, then incentivized to contact and recruit those clients after leaving Edelman for Mariner. None of the individual advisors were named as defendants in the current lawsuit.
In many cases, Edelman said Mariner asked the advisors to provide their employment agreements with the larger firm to figure out how to “best defend a lawsuit” for breaking the employment covenants.