TIAA subpoenaed over sales practices

Whistleblowers cited in Times article say the pension giant pressured reps to push expensive managed accounts

Nov 10, 2017 @ 11:53 am

By InvestmentNews

The New York attorney general has subpoenaed insurance and pension giant TIAA, seeking information on its sales practices in the wake of a recent story in the New York Times.

The TIAA practices drawing scrutiny also are the subject of a whistleblower complaint filed with the Securities and Exchange Commission, according to a new Times story. That complaint was filed by former TIAA employees, who contend they were pressured to sell products that generated more revenue for the firm, but were costlier to clients, while adding little value.

TIAA, which looks after retirement accounts for more than four million people working at 15,000 nonprofit institutions in the U.S., oversees client assets of nearly $1 trillion.

In the Times story, two of the current and former employees the newspaper spoke with said that TIAA had a saying about creating fear among clients to generate sales: "If they cry, they buy."

The SEC whistleblower complaint contends that in 2011 TIAA began trying to convert "unsuspecting retirement plan clients from low-fee, self-managed accounts to TIAA-CREF-managed accounts" that were more expensive, the Times said. According to the complaint, advisers were pushed to sell proprietary mutual funds to clients as well.

"In more than 10 years at TIAA, I have never heard such language, which is certainly not in keeping with our values or approved materials," TIAA spokesman Chad Peterson told InvestmentNews in an emailed response acknowledging receipt of the subpoena.

"We are undertaking an internal review regarding this matter to ensure all of our training materials are aligned with our mission, values, policies and procedures," Peterson wrote. "TIAA focuses exclusively on meeting our clients' long-term financial needs. We always put our clients first and operate in a highly transparent and ethical way."

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