One London-based adviser has said that an unseen restrictive covenant in a contract with his appointed representative (AR) firm means that he is prevented from working for one of the biggest networks in the country forever.
Graeme Brown had worked for London-based Scottsdale Consulting, an AR for the Intrinsic network, for a year before deciding to leave last month.
Unfortunately for Brown, an unseen contract between Intrinsic and Scottsdale prevents him from working for the Intrinsic Network for the rest of his life.
The restrictive covenant was not in his own contract with Scottsdale but exists at board level between Scottsdale and the network.
Brown was told about the covenant after he had paid £570 for a consumer credit license in preparation for joining Intrinsic as a sole trader.
Brown explained why he thought the contract existed: "Scottsdale commission scale is not particularly generous and this clause would prevent advisers moving to other firms. Similarly, it aims to prevent advisers wanting, as I did, to set up as a sole trader in the local area and acting in competition with Scottsdale.
"I think advisers should be aware that there might be limiting clauses like this when they join AR firms of networks - it closes a lot of doors for me. I could understand if the restriction was for a limited time period - six or 12 months or something but it is for the rest of my working life, it is very prohibitive."
Mike Wilson director of Scottsdale said he was not prepared to comment on what has happened contractually with an ex-adviser. He also described the matter as "highly confidential".
Intrinsic group sales director Stephen Fryett below: "Intrinsic's proposition is attractive to advisers across the industry. We always deal with our ARs in an open and transparent way, and we are clear that our primary relationship is with the AR firm rather than the individual adviser.
[Therefore] if an adviser wishes to leave a member firm and set up their own business with Intrinsic, they must obtain permission from their AR Principal before we will enter discussions. This provides business security to the AR Principal that Intrinsic will not ‘recruit' their advisers without their prior knowledge.
"On the rare occasions where the AR Principal does not grant this permission, we respect their decision and will not begin dialogue with the adviser."
Brown has since joined another directly authorised advisory firm in the area.
