Merrill Lynch has taken aggressive legal action against Charles Schwab, Dynasty Financial Partners, and a group of former advisors who collectively managed an estimated $129 billion in assets. The wirehouse accuses the defendants of orchestrating a coordinated campaign to lure away advisors, clients, and support staff in what Merrill describes as a “premeditated corporate raid.”
At the center of the dispute is a newly launched registered investment advisory firm called OpenArc, formed by former Merrill advisors from the Global Corporate & Institutional Advisory Services (GCIAS) group. Merrill’s lawsuit claims that the advisors, with backing from Schwab and Dynasty, conspired to undermine its business by using proprietary information, soliciting clients, and recruiting employees in violation of contractual agreements.
The Legal Claims
Merrill’s complaint, filed in federal court in Atlanta, accuses the defendants of breaching employment contracts, misappropriating trade secrets, and engaging in tortious interference with its business operations. The firm is seeking injunctive relief to prevent further disclosure of confidential information and solicitation of clients, along with monetary damages.
For Merrill, the lawsuit is not just about one group of departing advisors—it’s about sending a message that the firm intends to aggressively defend its client base, intellectual property, and advisor pipeline in an increasingly competitive wealth management landscape.
Industry Responses
Dynasty Financial Partners, long known for its role in supporting breakaway advisors, issued a pointed response. A company representative emphasized Dynasty’s respect for the Broker Protocol, the industry agreement that allows advisors to take limited client contact details when moving between firms. “We are strong advocates for advisor and client choice,” the representative said, stressing that “leadership by fear is not a sustainable retention strategy.” Dynasty framed the dispute as evidence of a cultural shift toward independence, noting that advisors today demand modern technology, flexible platforms, superior economics, and service models tailored to their clients’ needs.
Schwab, which serves as custodian for more RIAs than any other firm in the U.S., also denied any wrongdoing. “Our business practices are rooted in respect for individual choice and fair competition,” a spokeswoman said. “Any allegations to the contrary are unfounded, and we will defend ourselves accordingly. Our guiding priority remains the clients we serve.”
Merrill declined to comment publicly on the case, citing the pending litigation.
The Breakaway Movement in Context
For wealth advisors and RIAs, the lawsuit underscores the scale of the ongoing breakaway trend. Over the past two decades, hundreds of advisors have left wirehouses such as Merrill, Morgan Stanley, and UBS to launch their own independent RIAs. Dynasty has positioned itself as one of the primary facilitators of this movement, providing capital, technology, operations, and investment solutions to help teams establish independent practices. Schwab, as custodian, has often been the partner of choice for those newly formed RIAs.
While many breakaway teams oversee $1 billion to $10 billion in client assets, the group leaving Merrill’s GCIAS appears to be the largest team to date, with assets exceeding $100 billion. That scale represents a watershed moment in the competition between traditional wirehouses and the independent RIA model.
Inside Merrill’s GCIAS
The lawsuit shines a light on the inner workings of Merrill’s Global Corporate & Institutional Advisory Services unit. GCIAS advisors worked with ultrahigh-net-worth clients, corporations, and institutional investors, providing specialized services such as equity compensation consulting, retirement benefit plan design, and institutional investment strategy.
According to Merrill, GCIAS was not a typical advisor channel. Advisors in this group were provided with high-value client referrals from within Merrill and were not expected to prospect on their own. The firm alleges that these advisors often generated six- and seven-figure incomes primarily from business flowing through established institutional relationships and internal client referrals.
Because of this structure, Merrill claims that GCIAS advisors had extensive access to confidential client data, trade secrets, and proprietary business strategies. The firm argues that such information would be impossible to “port” over to a new platform without unauthorized disclosure.
The Alleged Departure Strategy
Merrill’s lawsuit paints a picture of a carefully orchestrated plan to dismantle GCIAS from within. According to the complaint, senior members of the group convinced colleagues to join them at OpenArc, using Merrill office space to organize meetings and pitch the move. The firm claims that financial incentives were offered to staff members in exchange for signing nondisclosure agreements related to the transition.
Dynasty allegedly provided additional inducements, including significant financial incentives to shift GCIAS business to OpenArc. Merrill also alleges that Schwab and Dynasty were aware of and encouraged the sharing of confidential information throughout the planning stages.
The lawsuit further contends that the defendants raised approximately $90 million in capital to support the launch of OpenArc, with backing from Dynasty and Schwab. Merrill argues that such financial firepower could not have been assembled without insider knowledge of the group’s structure, operations, and client base.
Retirement Program Implications
Another point of contention in the lawsuit involves Merrill’s advisor retirement program. Under this program, senior advisors are compensated for transitioning clients to junior colleagues while agreeing not to solicit those clients in the future. Merrill alleges that several GCIAS participants in this program violated its terms by attempting to move clients to OpenArc, undermining a key retention strategy for the firm.
Broader Implications for Wealth Management
For the wealth management industry, the case highlights several ongoing tensions:
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Advisor Mobility vs. Firm Protection – Advisors seek the freedom to move their practices and serve clients under independent models, while firms want to safeguard investments made in training, client acquisition, and proprietary systems.
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Broker Protocol Boundaries – While the Broker Protocol allows limited client information to be taken during transitions, disputes continue over what constitutes proprietary versus permissible data. Large-scale moves like GCIAS put the Protocol’s limitations under the spotlight.
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Scale of Independence – A $129 billion departure signals that the independent RIA channel is no longer a destination for just smaller practices. Large institutional-level teams now see independence as viable.
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Capital Partnerships – With Dynasty and Schwab playing visible roles in supporting such moves, the lawsuit underscores how access to capital, custody, and infrastructure can accelerate advisor independence at unprecedented scale.
For Advisors and RIAs: Key Takeaways
For wealth advisors considering independence—or competing against independent firms—the Merrill lawsuit offers several insights:
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Client Relationships Are King: Advisors with strong client loyalty and relationships remain valuable targets for both wirehouses and independent platforms. The dispute illustrates the intensity of competition over who “owns” the client relationship.
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Know the Rules of Transition: Advisors must navigate contractual obligations carefully, including retirement programs, non-solicitation clauses, and firm policies on data handling. Missteps can lead to costly litigation.
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The RIA Model Has Momentum: Even large institutional teams now see independence as attractive, supported by custodians and platforms like Schwab and Dynasty. For RIAs already in the space, this signals ongoing growth and opportunity for partnership.
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Litigation as Deterrence: Merrill’s aggressive stance suggests that wirehouses may increasingly use litigation to stem advisor departures. RIAs may see more firms attempt to enforce non-solicits and trade secret protections in court.
The Road Ahead
The outcome of Merrill’s lawsuit could reshape industry expectations around advisor mobility, client ownership, and competitive practices. If the court sides with Merrill, it could embolden wirehouses to take a harder line against departing teams. If the defendants prevail, it could further accelerate the breakaway movement by demonstrating the viability of large-scale transitions despite wirehouse resistance.
Either way, for advisors, the case is a reminder that the wealth management industry is evolving rapidly, with independence no longer the exception but increasingly the rule. The battle over OpenArc is not just about one team of advisors; it reflects a fundamental shift in where the power lies—institutional firms or entrepreneurial advisors.
For RIAs and the custodians and platforms that support them, the message is clear: the competition for advisor talent and client relationships has never been more intense. As more high-profile teams consider their options, the Merrill lawsuit will serve as a case study in both the opportunities and the risks that come with independence.
