Waddell & Reed Financial Inc. is settling a lawsuit that alleges it loaded its company 401(k) plan with costly in-house investments by agreeing to pay nearly $5 million.
The class-action lawsuit claimed the asset manager breached its fiduciary duty by assembling a 401(k) lineup consisting exclusively of proprietary funds without considering alternative, less expensive and better-performing options. The firm, which manages roughly $72 billion, sponsors the Waddell & Reed and Ivy-branded investments.
The parties reached a preliminary settlement of $4.9 million, which must still be approved by the court.
"Although there are strong defenses to the alleged claims and defendants deny any and all liability with respect to the allegations, all parties have determined that settlement is in the best interests of the litigants, the Plan and the settlement class members," Waddell & Reed spokesman Roger Hoadley said.
The lawsuit, Schapker v. Waddell & Reed Financial Inc. et al, was filed in the U.S. District Court for the District of Kansas in June 2017. The settlement motion was filed Nov. 19.
It's one of several self-dealing lawsuits filed within the last few years against asset managers for alleged mismanagement of their workplace retirement plans. Most of the defendants, similar to Waddell & Reed, have an active-management focus.
Several of the lawsuits have ended with settlements — Deutsche Bank paid $21.9 million, Allianz $12 million, Citigroup Inc. $6.9 million, TIAA $5 million, Jackson National Life Insurance Co. $4.5 million and New York Life Insurance Co. $3 million.