Morgan Stanley hit with suit over retirement plan
20 Aug 2016
In a sign of dissatisfaction with Morgan Stanley's management of its retirement plan 401(k), a participant has filed a suit in the US District Court in New York alleging that it offered investment options with fees that had fees and whose track records were poor, including some mutual funds run by Morgan Stanley itself.
The $8-billion plan had caused ''hundreds of millions of dollars'' in losses for its roughly 60,000 participants, the suit alleged.
Yesterday's suit comes as the latest in a growing list of complaints about high fees and poor investment choices at 401(k) and 403(b) retirement plans around the country.
A similar suit was filed last month against Franklin Templeton's 401(k) plan, which was followed by suits against the Massachusetts Institute of Technology, New York University and Yale University earlier this month.
Friday's suit alleged Morgan Stanley treated the plan ''as an opportunity to promote Morgan Stanley's own mutual fund business and maximise profits'' to the disadvantage of participants, who could have benefited more with funds from other providers that had better performance.
According to the complaint, which sought to include other workers, the company picked inappropriate and high-priced investments so that the bank would profit at the expense of its staffers.
According to commentators, the suit by led plaintiff Robert Patterson highlighted a friction that existed at financial-services firms that put employees into their own product.
The suit cited a number of Morgan Stanley mutual funds included in the 401(k) that performed worse than offerings from rivals. For example, a small-cap growth fund underperformed 99 per cent of similar funds in 2014 and 94 per cent in 2015, according to the suit.
Patterson had been identified as a Morgan Stanley retirement plan member from January 2011 to April 2014.
