Merrill Sues Dynasty, Schwab Over $129 Billion Breakaway

Can’t we all just get along? 

Dynasty Financial Partners announced a minority stake in a massive new RIA with $129 billion in client assets that recently broke away from Merrill Lynch. It’s one of the largest deals in recent memory and will add some 160 financial advisors to the Dynasty platform, according to a Form ADV. It’s the latest example of the breakaway movement that has lured thousands of advisors and advisory teams away from wirehouses and into the independent channel.

The blockbuster move has also prompted Merrill to file a federal lawsuit in US District Court in Atlanta against Dynasty, custodian Charles Schwab, and the former advisors, alleging that there was a “pre-meditated corporate raid” to launch the new RIA called OpenArc Corporate Advisory. The lawsuit claims the advisors used Merrill’s offices to plan their exit, recruited junior staff and helped the group raise $90 million to fund the move.

Raiders of the Lost Assets

Merrill also alleges that the departing advisors, who were from Merrill’s Global Corporate and Institutional Advisory Services group, violated the Broker Protocol, a set of agreements created in 2004 that aimed to establish rules for how advisors could move between competing firms. “Through the spread of misinformation and strong-arm tactics, the defendants already have conspired to poach Merrill’s GCIAS business, including 170 financial advisors and support staff,” the suit states. A Merrill spokesperson declined to comment.

However, Jeff Crowell, a former Merrill Partner and OpenArc’s managing partner, said in a Wednesday statement that the breakaway reflects demand for alternatives to traditional brokerage models. “Dynasty takes the protocol for broker recruitment very seriously,” a Dynasty spokesperson said via email. “Fear will not dictate the actions of the most independent-minded advisors who seek the best outcome for their clients, teams and their families.”

Got to Break Free. Merrill’s Global Corporate and Institutional Advisory Services group provides equity compensation and retirement plan services to corporations and wealthy clients. Because of this, much of the $129 billion in question is institutional and in 401(k)s. OpenArc plans to blend corporate benefits, executive services and private wealth management, according to a statement.

However the legal wranglings play out, the move may be the biggest example yet of the breakaway trend, as hundreds of advisors continue to leave the wirehouse world for the independence of RIAs. Cerulli estimated that by 2027, RIAs will manage 31% of all wealth management assets, while wirehouses are set to hold 27%.