Edward Jones is Sued Over 401(K) Excessive Fees

Another group of plaintiffs is suing Edward Jones, accusing the firm of charging excessive fees and self-dealing in its 401(K) Plan. In the complaint, the brokerage firm and a number of its employees, including managing partner James Weddle and financial adviser Brett Bayston, are accused of breach of fiduciary duty related to their decision to choose costlier mutual funds when there were less expensive, equivalent funds available. Edwards Jones and its employees are also accused of choosing an “unreasonable” amount of risky investment choices and engaging in self-dealing.

The purported self-dealing allegedly occurred through its distribution deals with a number of fund companies, including Franklin Templeton Investments, American Funds, BlackRock (BLK), and Goldman Sachs (GS). The plaintiffs claim that the fund companies paid Edward Jones revenue-sharing fees for access to its “captive market,” which included 401(K) participants, and “shelf space” in its brokerage business that targeted retail investors. As part of the distribution relationship, Edward Jones offered the fund companies’ investment options in its Edward D. Jones & Co. Profit Sharing and 401(K) Plan.

The plaintiffs believe that these distribution relationships affected the decisions made by the fiduciaries and ended up costing participants millions of dollars in excessive fees. An Edward Jones spokesperson says that the allegations are false and that the broker-dealer would mount a “vigorous defense.”

It was just in August that Edward Jones was sued in McDonald v. Edward D. Jones & Co. L.P. et al by a participant in its 401(k) plan. The lead plaintiff, who claims to have lost $8M in aggregate retirement savings, is alleging high fees for management and record-keeping services, which have purportedly cost plan participants millions of dollars in retirement savings,including $13M in excessive fees. The lawsuit also contends that record-keeper Mercer H R Services Inc. was paid unreasonable fees and that the retirement plan offered costlier mutual fund share choices when less expensive options for identical funds were available.

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Schultz et al v. Edward D. Jones & Co., L.P. et al (PDF)