Empower Managed Accounts Breach of Fiduciary Duties Class Action

Participants in retirement plans rely on plan fiduciaries to act in their interests, with loyalty and prudence. The complaint for this class action alleges Empower Retirement, LLC, Advised Assets Group, LLC (AAG), and other associated companies breach those duties to those who invest in Empower Managed Accounts, charging higher fees and concealing that the investment option funds are connected to Empower.

The class for this action is clients of Empower or AAG who are or were invested in a Managed Account from 2015 through the present, including

• Government employee clients of Empower or AAG whose deferred compensation plans invested in a Managed Account from 2015 through the present, and
• Private and RSG clients of Empower or AAG who invested in a Managed Account from 2015 through the present.

The complaint quotes Empower’s website, which presents the company as being “customer obsessed” and “do[ing] the right thing,” and (in garbled language) as “empower[ing] financial freedom for all.”

However, the complaint alleges that Empower requires “the use of fraudulent sales tactics to induce individuals to transfer assets from their low-fee employer sponsored retirement plans to Empower’s higher fee Managed Account product…” To get these customers, the complaint alleges, advisors make misrepresentations and omissions and conceal conflicts of interests.

Empower presents its advisors as salaried, disinterested fiduciaries who do not work on commission, the complaint says, and who therefore act only in the customer’s best interest. It gets consumers to participate ina “Retirement Readiness Review,” the complaint alleges, where an advisor can “identify the customer’s ‘pain points’ and ‘landmines’ to pressure the client to move their account into the discretionary and fee-based Managed Account.”

In fact, the complaint alleges that both the advisors and Empower’s proprietary software recommend only the Managed Accounts to customers.

The accounts are managed through AAG, the complaint says, which is wholly owned by Empower’s parent, GWF. Empower charges management fees based on the amount of assets in the account. The complaint alleges that the company does not tell clients that its Managed Accounts charge higher fees than other available options.

In the government markets division, the complaint alleges, advisors earn bonuses based on the amount of assets transferred in. The complaint alleges, “Typically, 25-35% of the Advisors’ annual bonus is based on the amount of assets transferred into Managed Accounts. … If the Advisor misses the quota by one dollar, the Advisor does not receive any bonus connected with the Managed Account conversions.”

Also, the complaint claims that Empower hides the fact that the funds offered as investments in the accounts are mostly related to Empower, by giving them names like AAG, Great-West, GWF, or Putnam, which clients are unlikely to know are related entities. This benefits Empower, because the funds are not freely selected from the best available ones.

In addition, the complaint alleges this permits “double-dipping,” with Empower charging a management fee for the accounts and the Empower-related companies connected to the funds also charging fees.

Article Type: Lawsuit
Topic: Investments
Tags: Breach of Fiduciary Duty, Concealing Information, Conflicts of Interest, Excessive Fees, Retirement Plans