Edelman Financial Engines has filed a lawsuit in a Texas District Court against a former advisor, claiming he violated advisor confidentiality and non-solicitation agreements when he moved to Farther in January.
Advisor John Carey started at The Mutual Fund Store, a predecessor to Edelman, in 2005, according to regulatory filings. Financial Engines, which later merged with Edelman, acquired The Mutual Fund Store in 2015.
As part of his employment, Carey signed advisor confidentiality and non-solicitation agreements saying he could not solicit clients for one year after his employment with the firm ended, the suit claims. The agreement also required him to keep Edelman’s trade secrets confidential, including client lists, investment positions and fee structure.
As of January, Carey was serving 260 clients across more than $112 million in assets, nearly all of which were generated through Edelman’s marketing efforts, the firm claims.
The complaint says Carey resigned from Edelman on Jan. 17 without prior notice and moved to Farther.
Now Edelman is seeking damages, claiming he has taken 55 clients and over $55 million in AUM so far as a result of the contractual violations. “He immediately joined Farther and continued breaching his contractual obligations, including by unlawfully soliciting and accepting business from the Edelman clients he had been servicing,” the complaint stated.
The lawsuit also claims he misappropriated trade secrets by using the firm’s confidential and proprietary client lists after he resigned. It also alleges breach of fiduciary duty of confidentiality and loyalty by using its client lists, investment positions and fee structure to divert clients from Edelman.
Carey did not return a request seeking comment prior to publication.
“We’re committed to safeguarding the confidential information of our company and our clients,” said an Edelman spokesman in a statement. “We filed this complaint to address the defendant’s actions, and to ensure that we protect our business and the trust our clients place in us.”