A lawsuit filed by Edelman Financial Engines accuses Prime Capital Investment Advisors of conducting a scheme to poach many of the firm’s clients, according to Financial Advisor.
According to the complaint, filed in the U.S. District Court in Delaware, Prime Capital offered lucrative compensation packages to lure advisors away from Edelman and conspired with those advisors to steal hundreds of clients and $1.5 billion in assets under management.
Edelman contends that Prime Capital conspired with the recruited advisors to follow a specific playbook developed “to ensure the successful exfiltration of confidential information and clients,” adding that the playbook is “a series of carefully orchestrated and methodical steps to raid Edelman of its planners and induce those planners to bring their client lists (which Edelman had provided) along with them—in violation of the planners’ contractual obligations and fiduciary duties to Edelman.”
Prime Capital was accused of instructing the recruited advisors to stay at Edelman, sometimes for months, while they “clandestinely extract the names and other confidential information on their client lists—through memorization or other undetectable means.”
The complaint said Prime Capital’s CEO Glenn Spencer and its director of M&A and advisor recruiting, Grant Spencer, have played key roles in executing the scheme, and goes on to name six planners who it said, “acted in concert for the purpose of harming Edelman’s business to Prime Capital’s benefit.”
Describing Prime Capital’s actions as “willful, wanton, and outrageous,” Edelman is seeking punitive damages as well as unspecified compensatory damages. The firm has also requested an injunction preventing Prime Capital from accessing or using the client information allegedly taken by the departed advisors and inducing others to breach non-solicitation and confidentiality provisions in their employment agreements with Edelman. Edelman claims that Prime Capital is attempting to recruit around 40 other planners.
Edelman contends that since April 2023 about a dozen of its planners have departed for Prime Capital, “smuggling Edelman’s confidential client information on their way out the door and soliciting Edelman’s clients as soon as they submitted their notice of resignation.”
Responding to the complaint, Prime Capital Financial asked a federal court to pause Edelman’s lawsuit. The firm, based in Overland Park, Kansas, requested that the case be transferred to Kansas’s jurisdiction.
The response also noted that Prime Capital had already been named as a defendant in three other lawsuits filed by Edelman elsewhere in the country, as well as ongoing arbitration claims involving similar actions.
“In this case, the gestalt of (Edelman’s) complaint is that (Prime Capital) is allegedly engaged in an ongoing conspiracy to steal its client relationships and to misappropriate its trade secret information, the response read. “(Prime Capital) adamantly denies all of those allegations. But, regardless of who ultimately prevails on the merits of those claims, granting a stay will streamline this case or, at least, simplify the presentation of important issues.”
in a statement, Allison Amadia, Edelman’s chief legal and risk officer, said the firm would not be “deterred by this baseless procedural maneuvering engineered to avoid the merits of Edelman’s claims.”
“We are continuing to pursue all appropriate legal remedies to protect our clients, our advisors and our business,” she said. “We will not tolerate the misappropriation of trade secrets or the exploitation of the trusted client relationships that Edelman Financial Engines has spent years building.”
If you are looking to move from one firm to another, planning to go open up or join an RIA, looking to sell your firm or grow through acquisition or bringing on new advisors, the attorneys at Hyman Cotter PC have the experience to guide you through the process to protect your interests. Regardless of whether the transition involves protocol or non-protocol firms, we will properly advise you so that you can focus on your transition and we will work to limit the risks you face during this transitional period. For more information, contact Hyman Cotter PC at 312-291-4600 or through our online contact form for a free consultation.
