Steve Goodrham, partner at law firm Gateley, explains the importance of getting solid legal advice if exiting staff wish to take their clients with them.
Mention the words ‘restrictive covenant’ in professional adviser circles and you are likely to receive a wealth of opinion about how the legal obligation is interpreted across the industry.
In the last few months, trade associations and experts have opened up a debate about whether we should follow the American line, by creating a standard adviser protocol when dealing with contentious moves, or company changes that ultimately impact on employee contracts and client relationships.
The Tax Incentivised Savings Association (Tisa) has even gone as far to set up an executive committee, which is charged with examining whether protocol can be achieved in the UK. It met for the first time last month [20 September], so it is clear the prospect of providing greater clarity through a unified approach is still very much on the agenda.
Why the rise of talent poaching underlines the importance of adviser contracts
High-profile court cases continually highlight the complexities that surround restrictive covenants in the professional adviser community, with a degree of uncertainty about the contractual obligation adding to Tisa’s argument.
What is more, according to our research, increased talent poaching has led to a significant rise in the number of employment disputes and breach of contract cases in the industry, so the issue is very much here and now.
The desire to capture the best talent has been triggered in part by poor redundancy strategies, and an increased demand for key personnel to provide businesses with a competitive edge.
Our statistics show that there has been a significant rise in cases being brought against those people breaching the terms of their employment contracts when joining rival companies. Interestingly, there has been a marked increase in cases where not only have specific individuals been targeted, but also entire teams.
Business heads understand the need to invest in top talent, even against a backdrop of economic uncertainty. This has led to more senior level hires and, inevitably, a spike in poaching from the competitor talent pool.
Incidents of poaching are happening more and more, particularly in highly competitive fields, like the professional adviser market, where talent and personal relationships are at a premium.
It is the sanctity of client relationships that influences many strategic decisions within the industry and a core part of Tisa’s drive to gain greater certainty on the issue of restrictive covenants.
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