By Andrew Welsch

Merrill Lynch filed a lawsuit against Charles Schwab, Dynasty Financial Partners, and a group of former Merrill Lynch financial advisors that oversaw $129 billion in assets, accusing the defendants of conspiring to "poach" its business, advisors, and support staff.

The lawsuit alleges the advisors, Schwab, and Dynasty engaged in a "pre-meditated corporate raid" and that they collaborated to divert business from Merrill Lynch to a new registered investment advisory firm that the advisors were launching called OpenArc.

The company accuses the defendants of violating their employment contracts, misappropriation of trade secrets, tortious interference with Merrill's business and employees, and other alleged misconduct. The lawsuit is seeking immediate injunctive relief to block the defendants from disclosing Merrill's trade secrets and soliciting clients. It also seeks monetary damages.

Merrill, which is a unit of Bank of America and one of the nation's largest wealth management companies, filed the lawsuit in a federal court in Atlanta.

A representative for Dynasty said it takes seriously the Broker Protocol, an industry agreement that permits advisors to take basic client contact information when switching between firms that are members of the agreement. "We are also strong advocates for advisor and client choice and believe that leadership by fear is not a long-term strategy on how to retain the best advisors and serve their clients over time," the representative said. "Fear will not dictate the actions of the most independent minded advisors who seek the best outcome for their clients, teams, and their families. Our focus remains delivering modern technology, flexible platforms, better economics, and world class service to our clients; the RIAs who trust us as their partners on their independent journey."

A spokeswoman for Merrill declined to comment.

A Charles Schwab spokeswoman said in a statement: "At Schwab, we hold ourselves to the highest standards of integrity, and our business practices are rooted in respect for individual choice and fair competition. Any allegations to the contrary are unfounded and we will defend ourselves against them. Our unwavering commitment to our clients remains our guiding priority."

St. Petersburg, Fla.-based Dynasty helps financial advisor teams leave national brokerage firms such as Merrill Lynch to open their own RIAs. Dynasty also provides asset management services to a network of RIAs. Schwab is the nation's largest custodian for RIAs. In 2022, Schwab made a minority investment in Dynasty.

Over the years, hundreds of advisors have left national brokerage firms as part of the so-called breakaway movement. The team of advisors who left Merrill is likely the largest breakaway team as measured by assets.

The advisors were members of Merrill's Atlanta-based Global Corporate and Institutional Advisory Services. GCIAS provides equity compensation services, retirement benefit plans, and institutional consulting to ultrahigh-net-worth individuals, businesses, and institutional investors, according to the lawsuit. GCIAS has 90 financial advisors and 80 operational professionals.

Merrill has thousands of financial advisors and several specialty groups that provide bespoke services to particular client groups. GCIAS is one such entity. Advisors working within GCIAS were different from other advisors in that they were provided client referrals from Merrill Lynch and "not required or expected to source the clients themselves," according to the lawsuit.

"The individual defendants typically did not prospect new clients," the lawsuit says. "Instead, they generated six- and seven-figure incomes from the downstream business derived from institutional clients already working with Merrill and internal referrals of potential clients from other segments of the company."

Members of GCIAS had access to proprietary information and company trade secrets, according to the lawsuit. "For obvious reasons, the confidential and proprietary information belonging both to Merrill and to its corporate and institutional clients is extremely valuable and not publicly available," the lawsuit says.

The lawsuit accuses the individual defendants of convincing senior members of GCIAS to move to OpenArc and using those senior members to "pitch the departure plan to junior members and support staff." It also alleges that they used Merrill Lynch offices to plan their departure and convince others to join them. The lawsuit alleges that they offered financial incentives to GCIAS employees to sign nondisclosure agreements with regard to "strategic discussions."

In addition, the lawsuit alleges that Dynasty "offered the individual defendants significant financial incentives to divert GCIAS business from Merrill to OpenArc and Dynasty." It also accuses Dynasty of encouraging the individual defendants to share confidential and proprietary information.

"Frankly, it is inconceivable that the individual defendants would not have shared this information with Dynasty and Schwab prior to coordinating the transition of approximately 170 employees and solicitation of significant client assets," the lawsuit says. "The nature of Merrill's GCIAS business is too complex to simply port over to another firm."

Merrill believes that Dynasty and Schwab helped the individual defendants accumulate approximately $90 million in capital funds for their move from GCIAS to OpenArc, according to the lawsuit.

The company also says that some GCIAS members had entered the company's advisor retirement program, which provides compensation to advisors in exchange for agreeing to transfer clients to junior advisors. As part of the program, participants agree not to solicit clients.

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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September 23, 2025 20:17 ET (00:17 GMT)

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