By Andrew Welsch

For nearly a year, two of the largest wealth management companies in the nation, LPL Financial and Ameriprise Financial, have been duking it out in court over financial advisor recruiting tactics. Now, a group of former Ameriprise advisors who work at LPL say they have been caught in the crossfire unfairly.

The legal battle began when Ameriprise sued LPL in federal court in July 2024, accusing its rival of improperly encouraging former Ameriprise advisors to take client information with them when they joined LPL. San Diego-based LPL denied the charges and said that the advisors, as independent business owners, only took information they were allowed to. In December, the companies reached an agreement that required the advisors to turn over personal devices to a third-party examiner who could then delete any client information that Ameriprise claims they shouldn't have had.

On May 7, the advisors' lawyers filed a motion to intervene in the case, arguing that the December agreement -- which they didn't agree to -- violates their rights.

"The intervening advisors are caught between two corporate behemoths engaged in a massive and multi-front recruiting battle," the filing says. "Unfortunately, as a result, they risk the invasion of their privacy and the trampling of their rights. They are not parties to these cases. They did not agree to the stipulated order." Yet due to the order, "They are now being forced to submit their personal devices to a forensic review and to allow the deletion of customer information from those devices despite having had no voice in the process that led to its entry."

The December agreement was intended to resolve some of the issues between Ameriprise, which is based in Minneapolis, and LPL. It provided that LPL would identify all customer and noncustomer information that former Ameriprise advisors provided to LPL using a bulk-uploading tool when they moved their practices to LPL. (Ameriprise said in an October filing that LPL and approximately 30 former Ameriprise advisors improperly retained information for more than 4,500 Ameriprise customers whose accounts had a total of $1 billion in assets.) The agreement also stipulated that the companies would hire an outside forensic examiner who could review advisors' personal devices and then delete from them any customer and noncustomer data that it found was improperly taken.

The advisors' May 7 filing says that the agreement unfairly allows the third-party forensic examiner to review their personal devices and delete information without their consent. The advisors, who are anonymous, say they weren't parties to the agreement and shouldn't be compelled to obey it. "No one should be forced to surrender their privacy without notice, without consent, and without a say," the filing states.

In the wealth management industry, advisors at independent broker-dealers such as LPL and Ameriprise are independent contractors who own their own practices and rely on an IBD to provide a brokerage platform, technology, and other services. When they switch firms, they typically take basic client contact information with them.

The LPL advisors' legal filing says they switched firms in this manner. "They retained their clients' information pursuant to the express terms of their contractual agreements with Ameriprise," the filing says. "And they did so with Ameriprise's knowledge and consent. Most of their clients followed them, and thus necessarily authorized the advisors to have their personal information in connection with the opening and maintenance of accounts for them at LPL."

If Ameriprise has concerns that client data was taken improperly and wants a forensic review, that can be done in private Finra arbitration where Amerprise has already filed claims against LPL and the advisors, they say. The advisors request that Judge Jinsook Ohta temporarily halt the court case proceedings pending Finra arbitration or at least modify the December agreement so that it only applies to noncustomer information they may have on their personal devices.

Lawyers for the advisors didn't respond to a request for comment.

Lawyers for LPL and Ameriprise were unable to reach a compromise solution regarding the advisors' request, according to a report jointly filed in court on May 27.

A representative for LPL says the company supports the advisors' request to move the forensic review to Finra arbitration. "The plan put forth by the advisors achieves the goal of the stipulated order and respects the advisors' privacy and due process rights," the representative says. "Ameriprise's refusal to negotiate in good faith reveals that its true purpose in this litigation is not to protect any legitimate privacy concerns but to punish advisors seeking true independence."

On May 28, Ameriprise asked the court to reject the advisors' request, arguing that the request is improper and too late.

The company says the advisors' filing is just the latest effort to delay Ameriprise's effort to protect clients' confidential data. "It is disconcerting that the court-ordered review by LPL has yet to take place, and that client data may still reside on certain advisors' personal, unsecured devices, which is dangerous and unacceptable," a spokeswoman said in a statement.

In its court filing, Ameriprise said LPL was entitled to bind itself and the advisors to the December agreement. Plus, the advisors and their interests have been adequately represented by LPL, Ameriprise said. "The court should not be swayed by the anonymous advisors' hyperbolic 'woe is me' approach," the company's filing states.

Write to Andrew Welsch at andrew.welsch@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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June 03, 2025 11:06 ET (15:06 GMT)

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