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Delta Employees Sue Fidelity for 'Illegal Kickbacks' from Financial Engines

"The suit ... implies Fidelity breached its fiduciary duty by accepting part of Financial Engines' advice fee despite Financial Engines providing no advice ... The plaintiffs maintain that if Fidelity was not being paid then the fee that Financial Engines would charge would be substantially less.... The lawsuit employs similar logic in alleging that Fidelity is acting illegally by offering retail classes of shares to investors when institutional shares exist, alleging that the aggregation of all the retail accounts equals one big institutional account."

Home Depot Court Finds for Defendants on Monitoring of Financial Engines Investment Advice Arrangement

"[This article discusses] plaintiffs' claim that plan fiduciaries failed to prudently monitor fees under the plan's advice arrangement with Financial Engines and (subsequently) Alight Financial Advisors. This is one of the few decisions we've had on the substance of this issue and includes some significant guidance for 401(k) plan sponsors that include in their plan an advice service for plan participants." [Pizarro v. The Home Depot Inc., No. 18-1566 (N.D. Ga. Sep. 30, 2022)]

Financial Engines and Xerox Questioned in ERISA Suit

"[In] order to be included as the investment advice service provider on Xerox HR's platform, plaintiffs suggest [Financial Engines] inappropriately agreed to pay -- and is paying -- Xerox HR a significant percentage of the fees it collects from Ford's 401(k) plan investors.... While the fees are 'being paid ostensibly for "data connectivity services" as described ... on Form 5500,' plaintiffs argue they are in reality 'being paid as part of a so-called 'pay-to-play' arrangement; better described in the pejorative as a kickback.' " [Chendes v. Xerox HR Solutions, No. 16-13980 (E.D. Mich, complaint filed Nov. 9, 2016)]

Voya's Win in 401(k) Fee Suit Involving Financial Engines Bodes Well for Other Record Keepers

" 'The court here has said that an entity can be a fiduciary for some purposes and not others, and with respect to this fee issue, Voya was not a fiduciary,' [attorney John Utz] said. 'It was not a fiduciary because it wasn't acting as a fiduciary in negotiating fees, and ... once the arrangement was in place, there was not anything Voya could do to control its compensation.' Voya, for example, couldn't control the number of participants using the personalized advice services offered in the Nestle 401(k) plan." [Patrico v. Voya Financial, Inc., No. 16-7070 (S.D.N.Y. June 20, 2017 ]

Why the Financial Engines/Edelman Deal Could End 401(k) Rollovers

"[R]obo-advisor platforms are recognizing that technology is better as a means to augment human advisors than compete against them.... [R]etirees will increasingly no longer need to find an advisor at retirement, as they'll just continue with the advisor they have had all along with their existing 401(k) plan.... [T]he entire market opportunity for independent financial advisors to grab 401(k) rollovers for unaffiliated consumers that don't have an advisor, may begin to vanish."

Court Dismisses Fiduciary Breach Claims Against Aon Hewitt with Respect to Financial Engines Arrangement

"[T]he fact that courts are dismissing these cases against providers does not mean that a participant advice arrangement cannot violate ERISA. Indeed, it is certainly possible that such an arrangement could be unreasonably priced. In this regard perhaps the most interesting language in the decision was the court's explanation of the 'reasonableness' standard in this context: The analysis is to focus on the fair market value of the the services as a bundle, not on how the two service providers -- the recordkeeping platform provider and the advice provider -- divide up the total fee." [Scott v. Aon Hewitt Fin. Advisors, LLC, No. 17-679 (N.D. Ill. Mar. 19, 2018)]

How Giant Advice Provider Financial Engines Can Sweep the 401(k) Field -- Or Not

"It has $53.7 billion of assets under its managed account platform, but how the new DOL disclosure rules, competition from Morningstar and Schwab's bet on GuidedChoice play out will be very telling."

Auto-Enrollment Benefits Young Savers, According to Financial Engines

Excerpt: About 52 percent of workers under age 30 eligible to automatically enroll in an investment option through their employer have the appropriate risk and diversification for their age to put them on a better track for retirement, compared with 12 percent of employees in that age group without access to such a feature, according to the study[.]

Voya Escapes Lawsuit Over 401(k) Robo-Adviser Fees

"A 401(k) investor who accused Voya Financial Inc. and its subsidiaries of overcharging for investment advice from robo-adviser Financial Engines Advisors LLC won't get another chance to make her case. A federal judge on March 13 denied the investor's request to amend her complaint ... The judge reiterated her prior conclusion that the investor couldn't use [ERISA] to challenge these fees, because the defendants weren't acting as ERISA fiduciaries when negotiating fees with Financial Engines."

Voya Accused of Layering 401(k)s With Unnecessary Fees

"According to the lawsuit ... Voya contracted with federally registered investment adviser Financial Engines Advisors LLC to provide advice to participants in Voya-administered retirement plans. Voya then charged participants a fee of as much as 50 basis points for this arrangement ... Voya's arrangement with Financial Engines is structured largely so that Voya can collect an unnecessary layer of fees from the retirement plans it oversees, according to the Nestle plan participant's complaint. In her view, this is an attempt by Voya to avoid federal laws limiting its ability to provide financial advice steering retirement savers toward its own products." [Patrico v. Voya Fin., Inc., No. 16-07070 (S.D.N.Y. complaint filed Sept. 9, 16]