Charles Schwab Corp. is the latest company to be hit with a lawsuit over their 401k fiduciary responsibilities in relation to “self-dealing,” or the in-house investment options included in the company’s 401k plan.
According to Bloomberg BNA, Schwab “larded” its own 401k plan with expensive and poorly performing investment funds and services that earned fees for the company at the expense of workers’ retirement savings.
The suit, filed Jan. 19, also “targets the performance of Schwab’s stable value fund and claims that Schwab executives allowed the plan’s trustee to profit from the unallocated plan assets it held,” the news service reports.
Morgan Stanley, Wells Fargo & Co., American Century Services LLC and a host of others have found themselves on the receiving end of similar litigation.
“In addition to raising claims about mutual fund fees and performance, the lawsuit against Schwab offers an interesting twist on the typical 401k fee dispute,” Bloomberg writes. “The lawsuit specifically targets Schwab’s self-directed brokerage program, which allows investors to choose from a wide array of non-Schwab funds and individual stocks.”
The brokerage system’s “byzantine complexity and confusing schedule of fees alone” make it “inadvisable for all but the most sophisticated of investors,” the lawsuit alleges.
The lawsuit against Schwab was filed in the U.S. District Court for the Northern District of California by Schneider Wallace Cottrell Konecky Wotkyns LLP and Berger & Montague P.C.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
