A new Class Action was filed against Wells Fargo on 11/22. The lawsuit accuses Wells Fargo of using their own Target Date Funds as the Qualified Default Investment Alternative (QDIA) even though they under-performed other Target Date Funds while having much higher expenses. The complaint also stated that this “generated substantial revenues for Wells Fargo” and provided “critical seed money that kept the funds afloat by boosting market share.”
It should be reiterated that ERISA requires that retirement assets are to be held in trust. To be consistent with Trust Law and a trust relationship, behaviors are dominated by the fiduciary duties owed to the participant. The fiduciary must remove all conflicts of interest and provide visible/transparent evidence that their behaviors were in the best interest of the participant.
It is not enough to only accuse, in proposition and allegation, that Wells Fargo breached their fiduciary duties. The plaintiff must do more than demonstrate higher fees. It must be proven that Wells Fargo failed in prudence, loyalty, and trust by not placing the interest of the participants above theirs.
Successful Class Actions will have to exhibit Subject Matter Expertise by proving that the defendant did not have a sound visible methodology to determine investment options and, thus, both the returns and likelihood that the participants will satisfy their retirement goals were reduced.