A chap asked a question the other day “I’m planning on leaving my IFA firm and setting up on my own. What is the situation regarding the transfer of client information?”
I thought it may be useful for others thinking of this kind of career move so here was the answer…..
The first thing you need to do is check your contract of employment or your contractor agreement if you are currently self employed. You need a clear picture of exactly what the situation is as regards to restrictive covenants and who owns the client bank because each contract is different.
Your employment contract may contain clauses, which are deemed too onerous, or which prevent “free competition”, anything, which prevents free competition, may not be legally binding even if you have signed it. Specialist advice should be sought relating to your individual circumstances and the advice here is meant only as a starting point for further investigation.
Moving to actual client data, presuming the clients you have been advising are the property of the business rather than your own then you will probably be legally and morally restricted from taking any information with you.
However, to pursue you through legal channels as regards to client information your ex-employer would need to show that the information you hold is “not in the public domain”.
Information deemed to be in the public domain is information, which could be acquired through standard investigation by anyone. Information not in the public domain would relate to confidential or privileged information which could not be acquired by investigation.
For example, addresses and phone numbers of clients may be available from marketing lists or the phone directory and may arguably be in the public domain. Confidential information on specifics of investments would definitely not be in the public domain.
I’m sure you will have an idea of which clients will be the key ones you will be building your new business on and this isn’t usually where problems occur.
The problems occur when advisers start mailing their previous employers client base. This breaks restrictive covenants. Restrictive covenants prevent you contacting clients, however it is a very different matter if a client contacts you because no contract can really prevent free competition.
I have heard many examples of how to engineer situations where clients contact your new business rather than you having to contact them and risk breaking covenants.
One IFA client of mine wrote to his client base as he had lost his company mobile phone whilst still in employment (well before he resigned) asking clients to contact him on his personal mobile when needing their next review. I believe he had a large Christmas card lists in the first few years of business too.
The main point here is to exercise caution, the last thing you need as a new business owner is a legal tangle, also remember, your integrity is very precious and something you should take extreme care of.
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