Edward Jones settles 401(k) lawsuit for $3.2 million

Plaintiffs alleged the brokerage predominantly used funds in its 401(k) plan that furthered its own business interests at the expense of employees

Dec 13, 2018 @ 4:34 pm

By Greg Iacurci

Edward Jones will pay $3.2 million to settle a lawsuit alleging the firm enriched itself at the expense of employees through mismanagement of its company 401(k) plan.

The lawsuit, which was filed in August 2016, claimed the brokerage firm stacked its retirement plan with certain investment options in order to further its business ties with those fund companies, instead of prudently selecting other funds that were less expensive.

Plaintiffs alleged many of the mutual funds were managed by the brokerage firm's "partners" and "preferred partners" — fund managers that worked closely with Edward Jones brokers and agents and paid revenue sharing to the firm based on marketing the funds to Edward Jones clients.

At least 40 of the plan's 53 investment options are managed by the partners or preferred partners, the lawsuit alleged.

John Boul, an Edward Jones spokesman, said the firm has always believed the claims to be without merit.

"We're pleased this matter has been resolved, avoiding the additional time and expense required to defend our position in a trial," Mr. Boul said.

He pointed out that the settlement agreement, filed Dec. 11 in the U.S. District Court for the Eastern District of Missouri, doesn't require any changes to be made to the company 401(k) plan. The settlement, which must be approved by the court, covers participants in the plan from January 2010 to the present.

The lawsuit, Valeska Schultz et al vs. Edward D. Jones & Co. L.P. et al, is one of several filed against financial services firms in the past few years for allegedly self-dealing in their 401(k) plans. The lawsuits have primarily targeted active fund managers that have loaded their retirement plans with in-house investments.

The bulk have resulted in settlements. Branch Banking & Trust Co. agreed to a $24 million settlement — among the largest to date — in late November.

The Edward Jones lawsuit was originally named Charlene F. McDonald v. Edward D. Jones & Co. L.P. et al, but changed after plaintiffs filed a consolidated complaint in February 2017.


What do you think?

View comments

Recommended for you

Featured video


These are the federal and state rules that will most impact 401(k) advisers

Will Hansen, chief governmental affairs officer for the National Association of Plan Advisors, discusses regulation and legislation poised to have the biggest impact on advisers.

Latest news & opinion

Centerbridge said to be in talks to buy Advisor Group

Advisor Group's independent broker-dealer network in the U.S. has more than 7,000 advisers.

The drawback of Richard Thaler's 401(k)-Social Security idea? Social Security itself

Observers think Congress would need to address Social Security's funding levels and offer enhanced protections for the concept to work

Social Security funding outlook improves slightly

Retirement reserves extended one year; disability fund by 20 years

IBD report: Another impressive year

Despite a stock market decline, revenue is up. And the streak isn't expected to end anytime soon.

IBDs with the most CFPs

How many of the more than 83,000 certified financial planners are employed by the big independent broker-dealers?


Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print