Merrill Lynch Sues $129 Billion Advisor Team, Schwab, and Dynasty in 'Corporate Raid' Case

Legal Dispute Between Merrill Lynch and Former Advisors

Merrill Lynch has taken legal action against Charles Schwab, Dynasty Financial Partners, and a group of former financial advisors who managed $129 billion in assets. The lawsuit claims that the defendants conspired to “poach” Merrill Lynch’s business, advisors, and support staff. According to the allegations, the advisors, along with Schwab and Dynasty, engaged in a “pre-meditated corporate raid,” working together to divert business from Merrill Lynch to a new registered investment advisory firm called OpenArc.

The lawsuit accuses the defendants of breaching their employment contracts, misappropriating trade secrets, interfering with Merrill’s business and employees, and engaging in other forms of misconduct. As part of its legal strategy, Merrill is seeking immediate injunctive relief to prevent the disclosure of trade secrets and the solicitation of clients. It also seeks monetary damages for the alleged harm caused by the actions of the defendants.

Merrill, which is part of Bank of America and one of the largest wealth management firms in the United States, filed the lawsuit in a federal court in Atlanta. The case highlights an ongoing tension between traditional brokerage models and the growing trend of breakaway teams forming independent advisory firms.

Industry Reactions and Responses

A representative for Dynasty emphasized its commitment to the Broker Protocol, an industry agreement that allows financial advisors to take basic client contact information when switching between firms that are members of the agreement. The company stated that it supports advisor and client choice, arguing that fear-based strategies are not sustainable for retaining top talent or serving clients effectively.

“Fear will not dictate the actions of the most independent-minded advisors who seek the best outcome for their clients, teams, and their families,” the representative said. “Our focus remains delivering modern technology, flexible platforms, better economics, and world-class service to our clients.”

A spokeswoman for Charles Schwab responded to the allegations, stating that the company upholds the highest standards of integrity and fair competition. “Any allegations to the contrary are unfounded, and we will defend ourselves against them,” she said. Schwab emphasized its commitment to its clients as its top priority.

The Role of Dynasty and Schwab

St. Petersburg, Florida-based Dynasty helps financial advisor teams transition from national brokerage firms like Merrill Lynch to independent RIAs (Registered Investment Advisers). The company also offers asset-management services to a network of RIAs. Schwab, the largest custodian for RIAs, made a minority investment in Dynasty in 2022.

According to a regulatory filing by OpenArc, Schwab serves as the custodian for the assets of OpenArc’s clients. Custodians play a critical role in safeguarding cash and securities on behalf of RIA clients and provide wealth management firms with essential technology and services.

The Breakaway Movement

Over the years, many financial advisors have left national brokerage firms as part of the so-called breakaway movement. The team of advisors who left Merrill Lynch is considered one of the largest such groups based on the amount of assets they managed.

These advisors were part of Merrill’s Atlanta-based Global Corporate and Institutional Advisory Services (GCIAS), which provides equity compensation services, retirement benefit plans, and institutional consulting to ultrahigh-net-worth individuals, businesses, and institutional investors. GCIAS consists of 90 financial advisors and 80 operational professionals.

In a press release, the advisors announced the launch of OpenArc, claiming that it would offer large employers a unified approach to employee benefits and financial planning. Jeff Crowell, managing partner of OpenArc, stated that traditional brokerage models no longer meet the needs of employees at all levels.

Allegations and Claims

The lawsuit alleges that the individual defendants convinced senior members of GCIAS to move to OpenArc and used those senior members to pitch the departure plan to junior members and support staff. It also claims that the advisors used Merrill Lynch offices to plan their exit and recruit others to join them.

Additionally, the lawsuit states that the defendants offered financial incentives to GCIAS employees to sign nondisclosure agreements related to “strategic discussions.” It further accuses Dynasty of providing significant financial incentives to the individual defendants to divert GCIAS business from Merrill to OpenArc and Dynasty.

Merrill claims that Dynasty and Schwab helped the individual defendants accumulate approximately $90 million in capital funds for their move from GCIAS to OpenArc. The lawsuit also notes that some GCIAS members had participated in Merrill’s advisor retirement program, which requires participants to transfer clients to junior advisors and agree not to solicit them.

OpenArc’s Vision and Partnership

In its press release, OpenArc described its partnership with Charles Schwab and Dynasty Financial Partners. The firm highlighted that it is combining its corporate benefits advisory model with Schwab’s capabilities and Dynasty’s technology platform. Dynasty took a minority equity stake in OpenArc, and its CEO, Shirl Penney, joined the firm’s board of directors.

“We’re incredibly impressed with the OpenArc team and their vision,” Penney said. “This relationship represents exactly the kind of innovative, client-focused model we believe will define the future of our industry.”