OpenArc quietly updates ADV, issues release, to show $10 billion of former Merrill assets have already landed -- despite BoA wirehouse's use of 'free fees' and other all-out retention tactics, sources say

OpenArc, the historic Merrill Lynch breakaway, has already reclaimed $10 billion in client assets and opened over 14,000 accounts since launching last September, despite Merrill's legal war to barricade the door.

In the latest update today (Mar. 27), the Atlanta RIA revealed a haul of transitioned accounts, and the addition of corporate benefits consulting and other personal wealth management services. according to an SEC ADV update and a press release. 

 (Editor's note: The SEC had not published the update as of publication of this article.) 

Though the team had managed $129 billion before the break – including about $17 billion of personal assets – the six-month progress report is cause for cheer, according to OpenArc Managing Partner Kevin Higginbotham.

"We are excited by the early success in both our wealth management and corporate businesses. Our success is driven by a deep commitment to integrity, forward-looking technology, and putting clients first,” he said. 

Owning the client

Shirl Penney, CEO of Dynasty Financial Partners, which helped execute the breakaway and whose firm own a minority stake, says that $10 billion is by no means all that will rejoin the ex-Merrill team. The amount is more than half of the personal assets expected over time.

Penney also argued in a LinkedIn post today that Merrill's actions to derail the breakaway actually reveals its attitude toward investors and advisors. 

"Not sure how it can be more clear about the feeling of who "OWNS" the client relationship and that advisors are seen as employees who work for the brokerage," he wrote. 

“More and more of the movement towards hashtag#independence is being client lead as clients want a hashtag#fiduciary based advisor who sits on same side of table as them, who ONLY works for them - the client.”

Penney was specifically citing Merrill’s lead attorney, Rachel Luken Carp, during a Sept. 30 hearing, according to today's Citywire. See: Merrill pushes back in OpenArc suit, accusing Dynasty of 'deliberately obtuse' reading

Carp advocated that by stopping the breakaway, ‘the public interest is served because the public has an interest in the enforcement of contracts, in making sure that servants are loyal to their masters when they are employed...'

Two-front war

Dynasty and OpenArc prevailed in the critical initial legal battle to keep Merrill from obtaining a temporary restraining order (TRO) against its partners and staff, which allowed them to launch the business. 

But Merrill has continued to seek its day in court – or at least before a FINRA arbitration panel. To date, it has largely been frustrated in even achieving the consolation of arbitration.

Merrill is waging a second battle on the ground, sources say, to retain as many clients as possible. One Merrill tactic, a source says, is to offer existing clients a temporary fee waiver, or what the source referred to as “free fees.”

In its latest court filing, Merrill lawyers attacked Dynasty's legal actions. 

“Dynasty continues to obfuscate, presenting the decision whether to maintain or lift the stay as a binary choice. It is not,” according to an AdvisorHub article today.

“The Court may use its broad discretion to fashion a practical, flexible solution that promotes efficiency, avoids duplication, and preserves the parties’ rights.”

Eyes fixed

In a Dynasty response, a spokesperson said “Merrill once again offers no support that there was ever an agreement by Dynasty to arbitrate."

The wirehouse "simply provides a nonsensical ‘flowchart’ that in substance merely confirms Merrill suffers no prejudice from the stay."

Merrill relies on “material misstatements of the record—including the Court’s own words,” the spokesperson added. 

With all the saber-rattling, Higginbotham assured that his firm is keeping its eyes fixed on the prize.

.“We’re focused on building a firm to serve the most discerning families and brands for the next hundred years.," he said in the release.

Schwab support

Because the institutional assets are in accounts held by Fortune 500 companies in many cases, those will undergo corporate processes and RFPs that could take years to play out, Penney says.

The plan is for those assets to land with Schwab, which got credit for making the first six months go smoothly despite all the legal noise dominating trade press headlines.

 “Schwab’s experience supporting one of the industry’s largest independent advisory launches has been critical,” said Emily Fletcher, OpenArc’s managing partner and chief operating officer in a release.

 “Clients want confidence in the safety and custody of their assets, and that custodial relationship has provided a strong foundation for us.”