Investors’ performance can be quickly sliced down when advisers and managers take hefty fees off the top. Fee abuse has been especially rampant in 401(k) programs, where employees sometimes aren’t paying enough attention, or operating procedures are opaque. Fed up with this assault on employee savings, lawyer Jerome Schlichter of St. Louis has begun suing for clients. At first, no one took him seriously. Anne Tergesen writes:
When Jerome Schlichter started filing 401(k)-fee lawsuits against big companies a decade ago, the personal-injury lawyer from St. Louis wasn’t taken seriously.
“We had heard that a lawyer who did railroad-injury cases was advertising for participants to sign up for litigation,” said James Fleckner, an attorney who defends companies in Boston. “We were unsure what to make of it.”
Companies now are so worried about suits alleging mismanagement of these retirement plans that 401(k) industry consultants have coined a term for the threat: “getting Schlichterized.”
Mr. Schlichter’s firm, Schlichter Bogard & Denton LLP, has secured $334 million in settlements for clients since 2010. Two years ago, it won a case before the Supreme Court, which ruled that employers with 401(k) plans have an ongoing duty to monitor the investments they choose.
Mr. Schlichter, 68 years old, said retirement plans previously didn’t receive watchdog treatment from regulators or anyone else. “Nobody’s bonus depended on how the 401(k) plan was managed,” he said.
Last year, law firms filed more than 25 fee cases against 401(k)-type plans, according to Groom Law Group in Washington. That includes 14 from Mr. Schlichter’s firm against employers including elite universities. The complaints allege, in part, that the plans failed to bargain for lower fees.
Consumer advocates say the litigation has saved 401(k) participants nationwide billions of dollars by helping to push down 401(k) fees, which declined 17% from 2009 to 2014, according to financial-information provider BrightScope Inc.
Read more here.
Jerry Schlichter Interview 401(k) Specialist TV
Latest posts by E.J. Smith (see all)
- Could Vanguard Take its Show on the Road? - July 24, 2017
- The World’s Largest Government Program is in Trouble - July 21, 2017
- Do Millennials Spend their Money Differently Than You? - July 20, 2017