Creative Planning, Schwab, Fidelity fighting adviser’s collusion charges

The firms named in the adviser's complaint go to 'corrupt and malicious lengths ... to keep their illicit profit mill churning,' according to the lawsuit.

After being hit last week with charges of industrywide collusion and a “group boycott” in a complaint by a financial adviser, some of the biggest names in the financial advice industry, including Charles Schwab Corp., Fidelity Investments Inc. and Creative Planning said this week they would battle the claims.

Financial adviser Stephen A. Greco, a former Creative Planning national director of wealth management, alleged “massive scale collusion” in the investment advice industry in the complaint, which was filed last Thursday in U.S. District Court for the Northern District of Illinois.

The defendants named in the complaint go to “corrupt and malicious lengths … to keep their illicit profit mill churning and silence any employees who dare to report their improper practices to federal law enforcement,” according to the lawsuit.

“This baseless lawsuit is Steve Greco’s latest attempt to disparage the company he left in 2017 to start a competing RIA,” Creative Planning attorney Melissa Sherman wrote in an email. “Mr. Greco’s malicious claims are completely meritless and wholly denied. The idea that Creative Planning colluded with custodians who removed his RIA from their platforms is ludicrous.”

The broker-dealer and registered investment adviser custodians “engage in price fixing and coordinate changes to pricing of RIA Custodial Services,” according to the complaint, which points to Schwab’s announcement in October 2019 that it would no longer charge commissions on trades of stocks, exchange-traded funds and options. TD Ameritrade Inc. matched Schwab’s move two days later and Fidelity made a similar change to its commissions within a week.

According to the lawsuit, Greco resigned from Creative Planning in 2017 and then filed a whistleblower complaint that named Creative Planning and TD Ameritrade with the Securities and Exchange Commission, and then three years later with the Department of Justice. His firm, Spotlight Asset Group Inc., has $229.3 million in client assets, according to its Form ADV.

“We fully intend to defend ourselves against these meritless allegations,” a Schwab spokesperson wrote in an email. In November 2019, weeks after Charles Schwab cut commissions, it announced that it was buying TD Ameritrade Holding Corp. for $26 billion.

“Spotlight Asset Group is alleging a concerted approach among Fidelity and its competitors in the custody space,” a Fidelity spokesperson wrote in an email. “Any such allegations are totally unfounded and Fidelity will defend itself vigorously against any such claims.”

Spotlight Asset Group uses LPL Financial as its custodian, according to its filings with the SEC. It formerly had custody agreements with TD Ameritrade, Schwab and Fidelity, according to the complaint and to industry sources who spoke privately.

“In their notice of termination letters, neither Schwab, TD Ameritrade, or Fidelity provided a reason for the removal of Spotlight from their custodial platforms,” Greco wrote in an email. “They did not cite any reasons that led to their termination decision, and they refused to provide any justification after multiple requests from Spotlight and our attorneys.”

[More: Conflicting tax information creates ‘nightmares’ for some investors]