A Guide to Entitlement to Credit Suisse Deferred Compensation
On October 20, 2015, Credit Suisse and Wells Fargo announced an exclusive recruiting arrangement “to provide relationship managers and their clients in Credit Suisse’s U.S. Domestic Private Banking business an opportunity to transition to Wells Fargo’s brokerage business, Wells Fargo Advisors.” The next day, Credit Suisse issued a press release where it confirmed, “we have taken the decision to transition our current Private Banking brokerage business model.” The reason it gave was that “the economics for Credit Suisse do not yet meet profitability criteria and, therefore, cannot achieve optimal returns for our shareholders relative to our alternatives.”
This decision has left CS’s domestic financial advisors scrambling to decide if they should join Wells Fargo or some other firm on the street. According to sources, Wells Fargo may not be offering CS advisors the best deal or the best platform for many of the advisors’ needs. In addition, CS advisors who focus on international clients are in an awful state of uncertainty because no announcement has been made as of this date as to that business, although it is clear the international operation will be shuttered too, leaving them no choice but to leave CS in order to protect their books of business.
According to multiple sources, CS domestic advisors who do not join Wells Fargo will not be paid their unvested deferred compensation. According to an article on AdvisorHub, one advisor that recently left CS received a package with a letter outlining “the loss of all deferred comp.” Our law firm has been contacted by more than a handful of CS advisors who fear they will lose their deferred compensation when they leave CS.
The Credit Suisse Deferred Compensation programs had many names for each award on an annual basis, such as the ISWAP Share Award, the PB USA Equity Share Award, the Growth Phantom Share Award, and the PB RM Contingent Capital Award. Although each program had its own master plan document, they are all virtually identical. In particular, each plan provides that the financial advisor forfeits any unvested plan benefits if he or she resigns.
None of the CS advisors are voluntarily resigning. They are being forced to find a new firm. If anything, it is an involuntary constructive termination. And, when they land at the new firm, the advisors are rightly going to want their deferred compensation that was left back at Credit Suisse. In order to obtain the deferred compensation, they will need to file individual claims in FINRA arbitration.
Because of the language in the plan documents, CS advisors must be careful about what they say in any communication that informs CS that they have taken a job at another firm. It should not be a typical resignation letter and it must avoid that usual “I hereby resign effective immediately” language. It should be a letter simply confirming that as a result of SC shutting down its Domestic Private Banking business, the advisor is accepting a position at the new firm.
Curtis Carlson has represented dozens of financial advisors in disputes with brokerage firms in his 38 years of practicing law and is representing multiple Credit Suisse advisors in relationship to their deferred compensation. Mr. Carlson can be reached at 305-372-9700 or carlson@carlson-law.net. For more information please visit www.carlson-law.net.