Breaking up is hard to do, as John C. Lindsey knows only too well: When the financial advisor broke away to go independent in 2012, Edward Jones sued him for $5 million.
But Lindsey fought back. After spending thousands of dollars in legal costs and sustaining much emotional wear and tear, he emerged victorious: the Financial Industry Regulatory Authority and an arbitration panel dismissed the case in July 2013.
Now, in a candid interview with ThinkAdvisor, Lindsey, 60, discusses the good, the bad and the ugly of his almost 16 years with Edward Jones in Simi Valley, Calif., and what he suffered when he left the fold.
A top producer and regional leader, he became a Jones partner in 1999 and was a general partner from 2001 to 2006. At the time he quit the firm, his was among its top 3% volume offices nationwide.
Now the CFP helms Lindsey & Lindsey Wealth Management in West Lake Village, Calif., partnering with Securities America branch office Cooper McManus, an RIA and office of supervisory jurisdiction (OSJ).
The feisty advisor’s personal mission is to embolden and help guide other advisors who are eager to break away from wirehouses or large regionals but feel trapped.
Jones’ suit charged Lindsey with violation of the California Trade Secrets Act, breach of contract, breach of fiduciary duty and unfair competition. In response, the million-dollar producer filed a counterclaim.
“Edward Jones had no objection to Mr. Lindsey’s departure, and the arbitration was never about that,” says John G. Boul, Edward Jones’ global media relations manager, in an email. “The arbitration concerned the protection of client information, something we take very seriously.”
He adds: “In the companion case filed in Ventura County Superior Court, the court ordered Mr. Lindsey to return all records taken from Edward Jones or any that contained information about Edward Jones’ clients. Ordered to surrender the records, Lindsey denied having any.”
ThinkAdvisor spoke with the Alabama-born advisor, a Navy fighter pilot’s son, who, prior to turning his hobby of investing into a profession, found a decade of success as an apparel industry executive. Here are excerpts from our conversation:
Why are you taking the time to give guidance to advisors who want to break away?
I was victorious; very few are. I want to let people know that they can be, too, if they believe in their conviction that they did no wrong. There’s no reason to feel trapped in your current employment. They’re just renting you; they don’t own you. You don’t have to sit there and take whatever the corporation feeds you. But few advisors go the distance because they get scared.
The Broker Protocol agreement allows advisors to take client names and contact info with them when they exit a firm. Jones isn’t a signatory. What impact does that have on advisors who leave?
They brutalize them through court activity, trying to restrict them with injunctions and driving up their legal fees. Jones is notorious for that. Then they try to get them to settle for about $30,000. And the advisor ends up signing a release saying they can’t say anything further about Edward Jones forever and ever. They’ve done this repeatedly, you say?
Yes, they’re very successful at interrupting the advisor’s business, driving them to financial distress and preventing them from saying anything about them as they go forward. They’ve got, kind of, carte blanche with our legal system. And [Jones managing partner] Jim Weddle is on the FINRA Board of Governors. That’s a pretty cozy relationship with a firm that has a reputation for going after financial advisors and having FINRA arbitrations.
Why did you decline the settlements Jones offered you?
They were suing me for $5 million. If they had gotten $5 million, I’d be selling suits at Nordstrom!
You had the foresight to hire an attorney before you left.
I knew that as a high-profile top advisor, a partner and a regional leader, there was a strong chance they would come after me because they wanted my head on a platter.
By speaking out, you could be tarnishing the Edward Jones image as a wonderful place to be employed. This year, Fortune magazine ranks the firm No. 4 on its “100 Best Companies to Work For” list, on which it’s appeared — always in the top 10 at least — for 15 years now.
This is one of the things I want to try to make sure people understand: Behind the scenes, Jones is not necessarily that “wonderful place to work.” They have this pristine image they’ve generated over time with great public relations effort. But behind the curtain, they’re not nice people. They have very much a “Kool-Aid culture.” If you drink the Kool-Aid, you can get along just fine. But if you resist drinking the Kool-Aid, then it’s very much like John Grisham’s “The Firm”: you’re excommunicated.
I’m not just picking on Jones. I’m talking about anybody who’s with a wirehouse and wants to leave. I happen to have been with Edward Jones; but I could have been with Merrill Lynch or Morgan Stanley or UBS or any number of firms — and it would have been the same story.
What support are you providing to advisors who contact you?
I’m available. I’m getting calls from all over the country from people who have an interest in moving. They may ultimately have an interest in Securities America or Cooper McManus. A lot of the calls have been from Edward Jones advisors interested in breaking away.
But the suit cost you money and caused a great deal of stress. For those reasons, maybe advisors are afraid to break away.
They have to weigh that. If they’re willing to sell out to the corporate situation, then they deserve what they get. I’m trying to encourage people to have the courage to stand and deliver.
From what you’ve said, it’s odd that you wanted to stay with Jones for 16 years. You must have liked working there at some point!
Most of the time I did. But they had become quite a bit different in how they treated their financial advisors. Over time, they were geared more toward taking care of the management within the partnership. How is that manifested?
They give partnerships away so that advisors will come in from the field and live in St. Louis; otherwise, very few want to go there. That leaves little or no partnerships to give to the field — [that is,] the advisors doing the work. Ninety-four percent of all partnerships are held by the home office general partners, and this has become more prevalent during the last 10 years. What some Jones executives are making, I’ve heard, is obscene.
Any other changes that you observed?
They had become a “corpocracy,” a corporate bureaucracy. I thought I was getting something completely different, and in the early years, I did. I was one of 2,300 advisors when I signed on; and I was very, very successful. Toward the end, I became one of 14,500 advisors. But that was fine. I pretty much could get anything done I needed to get done.
So why did you leave?
I would have stayed. I was fat, dumb and happy. I was 59 years old. How many people change jobs significantly at that age? I was doing exceptionally well. But the first thing that happened was that after I became a registered Kingdom Advisor [ministry of Christian advisors using biblical principles to invest if clients prefer] about 10 years after I joined Jones, they wouldn’t allow me to hang up my certificate.