Edward Jones Sued for Second Time over Alleged Fiduciary Failures

Plaintiffs allege that Edward Jones and its officials breached their fiduciary duties failing to prudently and loyally manage the company's retirement plan investments.

By John Manganaro | November 15, 2016
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A new proposed class action lawsuit filed against Edward Jones in the U.S. District Court of Missouri accuses the firm of a number of fiduciary breaches, including failing to adequately control investment costs on behalf of participants and favoring the use of funds provided by the investment advisory firm’s revenue-sharing partners.

The accusations match a previous suit filed by employees of Edward Jones, leveling similar claims that the firm favored the use of its business partners’ products within the plan for its own benefit.

“An employee participating in a 401(k) plan is limited to the investment options selected by the plan’s fiduciaries,” the text of the complaint explains. “Here, the investment committee selected and maintained the investment options of fund companies who participated in revenue sharing, ‘shelf space,’ or other business arrangements with Edward Jones.”

According to plaintiffs, in selecting and maintaining the investment options of these “product partners,” or other companies which returned a benefit to Edward Jones, the defendants “engaged in a form of self-dealing and cost the plan participants millions of dollars.”

Specifically, plaintiffs allege that Edward Jones company and officials breached their fiduciary duties failing to prudently and loyally manage the plan’s investments—by selecting and maintaining the investment options of fund companies with whom Edward Jones maintained revenue sharing and/or other arrangements; selecting and maintaining the higher fee share classes of identical funds; offering a money market account with a high fee and significantly lower performance than a low fee stable value fund; and including and maintaining an unreasonable number of high risk investment options.

“These actions/inactions cost plan participants millions of dollars and run directly counter to the express purpose of ERISA plans, which are designed to help provide funds for participants’ retirement,” plaintiffs allege. Further, plaintiffs suggest that Edward Jones breached its fiduciary duties by “failing to adequately monitor other persons to whom management/administration of plan assets was delegated, despite the fact that Edward Jones knew or should have known that such other fiduciaries were imprudently allowing the plan to select and continue to offer plan participants the higher fee share class options of the identical funds, maintain a poor performing and high fee money market account, and select and maintain risky investment options.”

NEXT: Telling details from the complaint