Schwab, Echoing Wirehouses, Pursues Broker Who Jumped to Competition
Charles Schwab Corp. has long insisted that it is much more than a discount brokerage for self-directed clients, and a court action it filed last week against a former broker sure makes the San Francisco firm look like a wirehouse.
Schwab asked a federal judge in Milwaukee to slap a temporary restraining order preventing Robert LaGrant from contacting 48 “high-net-worth” accounts whose account information he allegedly took with him when he resigned last month to join Fidelity investments, according to a filing in a federal district court in Wisconsin.
LaGrant, who had been with Schwab since 2002, according to his untarnished BrokerCheck history, did not return a call for comment.
Full-service brokerage firms such as Merrill Lynch and Morgan Stanley occasionally accuse brokers of violating customer privacy rules and in-house employment agreements by taking customer records with them to a new job. But Schwab, despite telling investors that it offers a full range of investment and financial planning services beyond the cheap execution platform on which it was founded, went back to its roots in claiming that even specialized brokers to the wealthy such as LaGrant are not conventional advisors.
“It bears emphasis that LaGrant did not develop a ‘book’ of business through cold calls, marketing efforts or his own connections like brokerage at other brokerage firms do,” the court filing said. “Instead, Schwab provided LaGrant with pre-existing Schwab clients or qualified leads to service.”
LaGrant “was assigned a practice containing almost 300 high net worth Schwab client households to service,” it alleged. “There is no public source available from which LaGrant (Or anyone else) could ascertain the identities and contact information of Schwab’s clients, muchless the high net worth clients he serviced.”
A Schwab spokeswoman wrote in an email that it has “specific policies and agreements in place” regarding client confidentiality and post-employment obligations of its roughly 3,000 brokers and “does not hesitate to enforce those obligations in court or arbitration when necessary.”
She said Schwab does not have a specific threshold for what qualifies as a “high net worth” client.
Servicing wealthy customers puts Schwab employees in competition with independent registered investment advisers who use the company as a custodian and service provider for their clients. The Advisor Services division has for many years been Schwab’s fastest growing business area.
Unlike the wirehouses and hundreds of other brokers and registered investment advisors, neither Schwab nor Fidelity are members of . The Protocol permits advisors at its 1,500 signatories to take limited data about customers with them when jumping among Protocol members without the risk of legal reprisal. A Fidelity spokesman confirmed LaGrant’s employment, adding that the company “takes the matter very seriously.”
In its restraining order request, which was filed on March 8, Schwab said it is seeking an expedited arbitration hearing with the Financial Industry Regulatory Authority seeking unspecified damages and “injunctive relief.” It accused LaGrant of downloading financial plan and other data on four dozen clients during a 25-minute period on the day before he gave four-weeks notice on February 1, and of saying that he put the printouts in a “shred bin.”
It specifically accused him of calling a single client on his company-issued mobile phone and of denying he made the alleged call.
LaGrant, joined Schwab in Milwaukee in 2002 after a four-year stint with H&R Block’s discount brokerage arm in Detroit, according to BrokerCheck.