Facts: The parties, the parents of two children, separated after 22 years of marriage. During the marriage, Husband, a stockbroker at UBS, took on the role of the breadwinner for the family.

One issue at trial was how to classify Husband’s “book of business”—his relationships with clients, assets under management, and income produced to manage these assets—from his job as a stockbroker for UBS. The income produced for managing the assets over a period of 12 months is called the “trailing 12,” which is based on a percentage charged to clients on the value of their assets under management.

Wife argued Husband’s book of business creates two valuable assets: (1) the potential recruitment bonus he will monetize if he goes to a new firm, and (2) the unvested retirement benefit he will monetize if he retires at UBS, transfers his book of business to other stockbrokers, and assists them during several years of transition.

Husband argued his book of business is simply his personal goodwill, and if he retires at UBS and transfers his clients to other brokers, he is paid only to the extent that he assists in successfully transitioning his clients. Husband argued that

[a]n attorney can convert a favorable reputation into money by agreeing to change firms. A physician can convert a favorable reputation into money by agreeing to change practices. The individual goodwill of attorneys and physicians is still not marital property, because the goodwill can be monetized only in the form of increased future earnings, and future earnings are not presently existing marital property.

The trial court held that Husband’s book of business, which requires him to keep clients, work their investments to produce income, and remain employed, is not something Husband owns, and it has no monetary value. Thus, it is not marital property and has no value.

Wife appealed.

On Appeal: The Court of Appeals affirmed the trial court.

Wife first relied on Fuller v. Fuller, in which the Court of Appeals affirmed the trial court’s judgment that the financial planner/husband’s trailing income generated by his ongoing management of his clients’ accounts was a divisible marital asset separate from any goodwill of the business.

The Court rejected this argument, distinguishing this case from Fuller:

Fuller is instructive but distinct. The financial advisor in the Fuller case sold products. [Husband’s] “book of business” requires him to keep clients, work their investments to produce income, and remain employed.

Wife also argued that marital property includes unvested retirement benefits, and Husband’s book of business is analogous to such unvested benefits. The Court disagreed:

Husband so-called book of business is not akin to unvested retirement benefits. Rather, it is akin to future income. Husband has to continue working in order to be paid; the pension analogy does not work here.

The Court concluded:

We emphasize that the classification and division of marital property implicates a trial court’s discretion. The trial court heard extensive testimony at trial. The trial court then considered and rationally distinguished Fuller, a recent case from this Court addressing trail income in the financial industry for purposes of divorce litigation…. [T]he trial court did not abuse its discretion.

The Court affirmed the trial court’s judgment that Husband’s book of business is not a marital asset subject to equitable division.

Hollis v. Hollis (Tennessee Court of Appeals, Eastern Section, June 29, 2022).

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