Fidelity sued by Delta 401(k) participants over alleged fiduciary breach

Fidelity sued by Delta 401(k) participants over alleged fiduciary breach
Claim alleges Fidelity 'wanted a piece of the action' when Financial Engines was hired to provide plan advice.
MAY 23, 2016
Participants in a Delta Air Lines Inc. 401(k) plan have sued units of Fidelity Investments, alleging fiduciary breaches in Fidelity's record-keeping role. The case, Fleming et al. vs. Fidelity Management Trust Co. et al., was filed May 20 in the U.S. District Court in Boston. Delta isn't a party to the lawsuit. The participants, who are seeking class-action status, alleged that Fidelity “wanted a piece of the action” when Financial Engines was hired to provide investment advice for the Delta Family-Care Savings Plan, according to the complaint. The plan had $7.84 billion in assets as of Dec. 31, 2014, according to its latest Form 5500. “In order to be included as the investment advice service provider on Fidelity's (record-keeping) platform, Financial Engines agreed to pay — and is paying — Fidelity a significant percentage of the fees it collects from 401(k) plan investors,” the complaint alleged. Financial Engines isn't a party to the lawsuit. (Related: Class-action surge ups the ante for 401(k) advice) This arrangement “inflated the price of investment advice services that are critical to the successful management of workers' retirement savings and violates (Fidelity's) fiduciary responsibility,” the complaint said. Participants also alleged that Fidelity's management of a self-directed brokerage account, called BrokerageLink, “acquires share classes that have higher expense ratios,” the complaint said. These share classes “will pay Fidelity significant amounts in revenue-sharing payments, effectively using the plans' assets for its own benefit and its own account.” Vincent Loporchio, a Fidelity spokesman, wrote in an e-mail Friday that “the allegations in this complaint are without merit, and we intend to defend against them vigorously.” Robert Steyer is a reporter at sister publication Pensions & Investments.

Latest News

SEC charges Chicago-based investment adviser with overbilling clients more than $2.5M in fees
SEC charges Chicago-based investment adviser with overbilling clients more than $2.5M in fees

Eliseo Prisno, a former Merrill advisor, allegedly collected unapproved fees from Filipino clients by secretly accessing their accounts at two separate brokerages.

Apella Wealth comes to Washington with Independence Wealth Advisors
Apella Wealth comes to Washington with Independence Wealth Advisors

The Harford, Connecticut-based RIA is expanding into a new market in the mid-Atlantic region while crossing another billion-dollar milestone.

Citi's Sieg sees rich clients pivoting from US to UK
Citi's Sieg sees rich clients pivoting from US to UK

The Wall Street giant's global wealth head says affluent clients are shifting away from America amid growing fallout from President Donald Trump's hardline politics.

US employment report reactions: Overall better than expected, but concerns with underlying data
US employment report reactions: Overall better than expected, but concerns with underlying data

Chief economists, advisors, and chief investment officers share their reactions to the June US employment report.

Creative Planning's Peter Mallouk slams 'offensive' congressional stock trading
Creative Planning's Peter Mallouk slams 'offensive' congressional stock trading

"This shouldn’t be hard to ban, but neither party will do it. So offensive to the people they serve," RIA titan Peter Mallouk said in a post that referenced Nancy Pelosi's reported stock gains.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.