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What exactly is the “Garden Policy” and will it hamper recruiting?

Traditionally, wealth management firms largely follow a broker protocol, whereby an advisor cultivates a personal relationship with clients and has ownership of their business. A garden leave restriction would require an advisor to not only stay with a firm for a certain period of time, but also hold off on contacting existing clients.

In February, Bank of America Corp. gave its U.S.Trust advisors notice that they were subject to the garden leave restrictions if they left the company. (Advisors could take a leave from the firm for up to 60 days, during which time they may or may not be assigned work. They would also have to wait six months before soliciting business from their existing clients) Not surprisingly, this sent some tremors throughout the industry.

In March, Bank of America assured its Merrill Lynch wealth unit they will remain under the broker protocol. The debate around these restrictions continues with U.S. Trust claiming a “protection of the client approach.” While the client still has the option to decide to follow an advisor who leaves, both the client and the advisor become less “portable.”

On the other side of it, an advisor being recruited by a firm with the garden leave policy becomes even more challenging. Not many advisors I know are going to be too happy to move to a firm with such a controlled employment agreement.