The Federal Trade Commission (FTC) serves a very important role in the modern economy. It helps guide and also enforce economic policy. When it announces major plans, businesses and professionals often benefit from listening.
As a financial professional who works for a powerful business but dreams of starting your own registered investment advisor (RIA) entity, you may currently believe that your contract with your employer effectively prohibits you from exploring your entrepreneurial impulses. You likely signed a non-compete agreement that restricts your entrepreneurial opportunities.
However, the FTC recently made an announcement that could prove very valuable for those dreaming of taking control of their careers but currently unable to do so because of their employment contracts.
The FTC wants to end non-compete agreements
The more money you make for your employer, the more likely they are to try to limit your opportunities if you were to leave the company. Requiring that financial advisors and similar professionals sign non-compete agreements is common practice throughout the financial world. It is also a practice that tethers workers to jobs and suppresses innovation.
When you first accepted your current job, you may have signed a contract that will limit where you can obtain a new job and your ability to start a company of your own. Typically, non-compete agreements only remain enforceable for a certain amount of time, but having a multi-year gap in your employment history or accepting other work for several years could also damage your earning potential or affect your relationships with others in the industry.
The FTC would like to completely curtail their use to better protect the rights of workers. It remains to be seen what the FTC’s ban would look like if it becomes federal policy. At this time, there is no certainty as to whether it would apply to existing contracts or simply new employment arrangements.
Reviewing your contract is a good starting point
As a financial professional who dreams of running their own firm, you need to understand what actions might leave you financially or legally vulnerable to claims by your former employer. Discussing changing employment law rules and your existing work agreements with a lawyer can be a good starting point if you hope to form your own RIA entity.