John Hancock (NYSE: JHI), a leading investment services company, has been sued for adding proprietary products in its retirement plans. The class action lawsuit is led by a former employee who alleges that Hancock broke the law by supplying proprietary products in the company’s employee 401(k) plan.
Her complaint alleges that John Hancock’s products when she could have invested in additional lower-cost funds from third parties that may have generated higher yields.
According to the records, Ms. Baker engaged in the John Hancock 401(k) plan from 2014 to 2019. However, John Hancock is not the only company that’s been accused of “self-dealing” in recent years. Others, such as Charles Schwab, Prudential, Goldman Sachs, and Morgan Stanley, also have been questioned over their retirement programs.
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Center for Retirement Research at Boston College (CRR) reported there had been 40+ class actions filed against financial/investment firms for adding their products in their 401(k) options.
Companies must undergo a meticulous selection procedure to add in-house goods to their retirement plans. All parties, including the employers, plan sponsors, and advisors, need to have to consider the performance, price, and other relevant benchmarks before adding investment products from 401(k) plans.
The CRR report stated that plan fiduciaries are prone to this type of litigation when their funds/investments experience poor performance compared to similar’ benchmark’ funds.
Thousands Are In John Hancock 401 (k) Plan
According to BrightScope, the John Hancock 401(k) program was set up in 1988 and held $1.6 billion, one of 9,800 participants as of 2018.
The 401 (k) plan uses a group annuity structure in which members can choose among several investment choices — all of which have been the John Hancock proprietary products as 2014, as noted in Baker’s lawsuit.
The lawsuit also supposes that the company’s Multimanager Lifestyle Conservative, Balanced, Development, Moderate, and Aggressive funds represented $295 million in plan assets. However, when compared to rivals like American Funds, Fidelity Investments and Vanguard, the company has high fees and weaker performance in its target-risk and target-date funds.
Also, according to the complaint, John Hancock’s Multimanager Lifetime target-date funds comprised $500 million of the firm’s 401(k) assets as of 2018. However, much like its other funds, the products were pricier and had lower net returns compared to other similar alternatives from American Funds, Vanguard, TIAA, and T. Rowe Price.
The lawsuit states that the 401(k) plan supposedly had extremely high administrative expenses and fees during the course period, which dates back to 2014. Furthermore, the participants covered those expenses through a 0.1% revenue-sharing fee baked to the mutual fund costs.
The complaint says that the John Hancock used the program, one of the most significant 401(k) applications from the U.S., to market John Hancock’s proprietary financial products and make profits for its own business.
Investors Seeking Recovery of Losses
Investors that have lost money in the market can contact Haselkorn & Thibaut, national investment fraud lawyers, for a free consultation by calling 1 888-628-5590