There have been several class action suits over the Target Fund selections in our 401K. I knew one of the guys who filed a lawsuit and he was a super intelligent guy. I trust his facts and data are accurate, but he has yet to prevail in court. Perhaps if our new leadership continues it’s short-sighted and arrogant ways of undervaluing their employees, it will irritate someone enough to try again.
You can Google all the details yourself, but multiple suits allege the bank and it’s fiduciaries violated ERISA by using several proprietary investments and failing to seek out cheaper and better performing options for their employees. The lawsuit compared the expensive fees and performance of our Target Date Funds vs those of Vanguard and Fidelity. The comparable Target Date Funds from the other companies charged lower fees and outperformed our funds. And it goes further to allege that our proprietary funds make even more money off our employees by investing in proprietary products. Expensive WFC proprietary funds investing in expensive WFC proprietary products.
In other words, our employer (allegedly) makes a lot of money off the $40 Billion invested in our 401K plan and that probably equates to lower profits for you if you use the Target Date Funds. And unfortunately, many of our employees are not experts in investing, so they unknowingly default to the more expensive Target Date Funds.
You can look up the fees for our 401K choices yourself. They may seem small, but they can have a major impact on your investment results over time. For example, in a study by the SEC, for every $100,000 invested over 20 years time: annual fees of 1% vs 0.25% would reduce your portfolio value by $30,000.
It’s a rough world out there right now. Right or wrong, I grew up trusting my employer and that was an easier more pleasant way to live. And my employers trusted me, for good reason. Trust begets trust.
But these last 4 years have been difficult and the past 1 year especially hard. I hope something changes, but as it stands today: I consider this new leadership team to be our adversary. We are no longer considered assets to the firm, we are costs that need to be cut. And I will act accordingly.