Edelman Financial Sues Mariner Over Alleged Poaching of Trade Secrets, Clients

“The complaint we filed today describes in great detail a prolonged pattern of deceptive actions used to steal Edelman Financial Engines’s confidential and proprietary business information, mislead our employees, and misappropriate our clients and the assets we manage for them,” a spokeswoman for Edelman said in a statement. “We are taking this step to put a stop to these unlawful practices.” 

The spokeswoman says the firm will “litigate this matter vigorously” in order to protect its investments in its business.

A Mariner spokeswoman declined to comment.

The lawsuit pits two fast-growing and high-profile wealth management firms against each other. Mariner and its affiliates advise on over $114 billion in assets as of June 30; Edelman has more than $245 billion in assets. Both firms have been acquiring smaller registered investment advisory firms, adding to their AUM, employee ranks, and footprint. Edelman and Mariner are ranked No. 1 and No. 4, respectively, among Barron’s Top 100 RIA Firms for 2023. The rankings are based on assets, revenue, and other measures that indicate the quality of the practice.

Edelman financial planners who left for Mariner aren’t named as defendants in the lawsuit.

The Edelman lawsuit alleges that Overland Park, Kan.-based Mariner has been recruiting high-performing Edelman financial planners and incentivizing them to disclose proprietary client information. Mariner has hired 10 financial planners from Edelman in the past two years, according to the lawsuit.

Edelman says it has not just lost staff due to Mariner’s recruiting efforts; approximately 850 Edelman clients representing more than $620 million in assets under management have also left the firm for Mariner, according to the lawsuit.

Competition for talent in the wealth management industry is fierce. The national brokerage firms, for example, regularly recruit top financial advisors from each other.

Edelman says its business model is different from other wealth management firms.The Boston-based company provides its financial planners with leads on prospective clients whereas financial planners at other firms have to drum up their own business. Edelman says it invests millions in marketing and other efforts to promote its brand and generate referrals. 

“The resulting data on current and prospective clients, their ability to invest, investment histories, investment positions applied to client portfolios, actual fees charged to clients, and actual fees paid to planners and referral sources are among Edelman’s most valuable trade secrets and give it a competitive advantage in the industry,” the company’s lawsuit says.

As a result, Edelman says its financial planners are required to sign non-solicitation agreements as well as employment agreements requiring them to maintain the confidentiality of Edelman’s trade secrets and proprietary information.

Edelman’s lawsuit details what it says has been a pattern of Mariner hiring Edelman financial planners and incentivizing them to create lists of the Edelman clients they had served and then convey that information to Mariner. Those lists contained confidential and proprietary information, such customers’ assets and ability to invest more, according to Edelman. The planners, who worked at different locations, left Edelman from July 10, 2021, to Nov. 1, 2023, according to the lawsuit. Most of the departures happened this year, according to the lawsuit.

Edelman alleges that Mariner continues to entice its employees to leave and join Mariner, and it accuses Mariner representatives of making defamatory statements about Edelman. 

The firm alleges Mariner representatives have pressured Edelman employees to accept positions at Mariner, claiming that everyone at Edelman is “jumping overboard.” At least one Mariner representative allegedly told an Edelman employee that “We’re running Edelman Financial Engines out of business,” according to the lawsuit.

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