Investment Adviser Book of Business Ownership a Growing Concern
Dennis Egan and James Giszczak, attorneys with Butzel Long in Ann Arbor, Mich., spoke on risk management issues on the topic at NACUSO's recent annual conference. When an investment representative leaves a credit union's program with little to no advance notice, having a previously deployed account retention strategy in place can save a lot of grief, they said.
"Credit union reps surprisingly have large books of business," Egan said. "The overhead is provided by the credit union. It's usually the credit union that is losing the person, not gaining."
Giszczak said the time to start having discussions about what happens to the book of business should a rep leave is before bringing them on board. That includes identifying those assets that should be protected, have an enforceable agreement and should a rep indeed leave, doing quick analysis to determine whether there's been any theft or breach of contract.
"One of the things companies have to be aware of is taking extra precautions to make sure member information is not breached," Giszczak emphasized.
Technical industries are more likely to be ahead of the curve when it comes to protecting data, Egan said. Credit unions and other financial institutions "don't realize that their information can be just as valuable as paint [formula] or a micro chip." This is critical for those reps that are jumping ship, which Giszczak and Egan acknowledged is happening more these days.