Invesco sued for 'indiscriminately' loading 401(k) plan with in-house funds

At least 93% of the funds in the Invesco 401(k) plan are proprietary investments, according to the plaintiffs.
JUN 04, 2018

Invesco has been sued for allegedly stacking its 401(k) plan with proprietary investments, joining the ranks of more than 20 asset managers who have had to defend against similar claims of mismanagement by employees seeking to claw back lost retirement savings. Diego Cervantes, a participant in Invesco's 401(k) plan, claims the company used investors in the company retirement plan "as a captive market for Invesco's proprietary investment products" in order to earn "lucrative fees" and boost assets under management. Mr. Cervantes claims that, between May 2012 and the present, 93% to 95% of the funds in the roughly $875 million retirement plan were affiliated with Invesco and that many performed worse or had higher fees than similar, unaffiliated funds. Further, the plan offered approximately 150 to 205 investment options during that time period, far more than the average 401(k) plan, which typically has 10 to 15, the plaintiff said. "Defendants indiscriminately dumped Invesco mutual funds, [exchange-traded funds], and other investment products into the Plan in breach of their fiduciary duties," according to the lawsuit, which was filed in the U.S. District Court for the Northern District of Georgia. Invesco spokeswoman Jeaneen Terrio declined to comment on the allegations, saying the company doesn't comment on litigation matters. Several asset managers have been sued in recent years over use of in-house funds in their respective 401(k) plans. The defendants have primarily been those that, like Invesco, use actively managed investment strategies. Examples include Franklin Templeton Investments, TIAA, New York Life Insurance Co., T. Rowe Price, Wells Fargo & Co., Capital Group, MFS Investment Management, Allianz Asset Management, JPMorgan, Waddell & Reed, American Century Investments and Putnam Investments. Judges have dismissed a few cases, including those involving Wells Fargo, Putnam and Capital Group, but most have been allowed to move forward and are still pending. Other companies, such as Allianz, TIAA and New York Life, have settled their lawsuits, for $12 million, $5 million and $3 million, respectively. Lawsuits against investment managers are an offshoot of a broader trend of retirement-plan sponsors being sued, often large corporations targeted for excessive administrative and investment fees in their 401(k) plans. Other offshoots include universities being sued for management of their 403(b) plans. The Invesco lawsuit, Diego Cervantes v. Invesco Holding Company (US), Inc. et al, was filed May 24. It was first reported by Law360.

Latest News

Five-person Raymond James team jumps to Janney in Maryland
Five-person Raymond James team jumps to Janney in Maryland

The group led by a 37-year industry veteran brings $470 million in assets to the Philadelphia-based broker dealer.

$20B Merit looks to next phase as Constellation takes minority stake
$20B Merit looks to next phase as Constellation takes minority stake

The Atlanta, Georgia-based national wealth firm revealed its new PE partner as prior backers Wealth Partners Capital Group and HGGC’s Aspire Holdings exited their investments.

$350M father-son duo hops from Osaic to Equitable Advisors
$350M father-son duo hops from Osaic to Equitable Advisors

The latest departures in Ohio mark another setback for the hybrid RIA, which is looking to "expanding its presence across all models and segments of the wealth management industry.”

Fresh off HPS acquisition, BlackRock inks deal for $7.3B ElmTree Funds
Fresh off HPS acquisition, BlackRock inks deal for $7.3B ElmTree Funds

The St. Louis-based real estate investment firm gives the asset management giant a valuable access point to the roughly $1 trillion net lease market.

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.

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.