J.P.
Morgan has agreed to pay $75 million to settle litigation alleging it invested
its stable value funds in risky assets, causing losses to retirement plan
participants.
The
consolidated litigation alleges that the defendants managed the plaintiffs’
investments imprudently in violation of its fiduciary duties under the Employee
Retirement Income Security Act (ERISA) by causing its stable value funds to
invest heavily in the Intermediate Bond Fund (IBF) and the Intermediate Public
Bond Fund (IPBF). The defendants managed the IBF and IPBF in the same way and
invested them both in risky, highly leveraged assets, including, among other
things, mortgage-related assets. At the filing of the first lawsuit, J.P.
Morgan Chase & Co. announced it would shed mortgage debt from its stable
value funds.
Earlier
this year, U.S. District Judge Vernon S. Broderick of the U.S. District Court
for the Southern District of New York certified a class and two subclasses of
participants in the lawsuit. The named plaintiffs, of which there are 12,
invested in five of JPMC’s stable value funds through nine 401(k) retirement
plans, each overseen by a different employer plan sponsor. They sought to
represent participants in more than 300 retirement plans which were invested in
78 stable value funds.
The settlement has
been agreed to by the parties and a motion has been filed with the court for
preliminary approval.
New research from BMO Wealth Management underscores the role
psychological biases can play in shaping people's approaches to financial
planning throughout their lives.
BMO Wealth Management released a new report focusing on the
attitudes and behaviors voiced towards saving and investing across generations, appropriately
titled “Generational Perspectives: How
Millennials, Gen-Xers, and Baby Boomers Save and Invest.”
The report is based on a survey of more than 1,000
working-age Americans, and according to BMO researchers it reveals compelling
insights about the differences
and similarities among generations, while also highlighting key
distinctions in the way men and women save and invest.
Tania Slade, U.S. national head of wealth planning, observes
that nearly 60% of respondents across all three generations cite saving and
investing for retirement as their primary financial goal. In addition, respondents
in every generation indicated that a diversified portfolio approach is their
top method for investing.
For investment preferences—with or without assistance—respondents across generations were again in agreement, Slade says, choosing
most often to rely on the guidance of an adviser at a financial institution.
Millennials reported heavier use of robo-advisers (10%), with Generation X
coming in a close second at 9%—compared to just 5% of Boomers.
Women surveyed were slightly more conservative investors
than men, BMO reports, as 19% of women prefer to invest in individual stocks,
compared to 25% of their male counterparts. Further, 16% of women say they
invest in certificate of deposit (CD) accounts and money market securities,
compared to 12% of men.
Data from BMO shows basic generational differences when
respondents who neither save nor invest regularly were asked to explained why.
Twelve percent of Millennials “worry too much about losing money,” compared to
only 7% of Boomers. Meanwhile, 18% of Millennials “admitted it is too
complicated,” compared to just 8% of Boomers.
“When asked what they find confusing about investing, 21% of Millennials cited discomfort from a lack of understanding of the markets, a
reason cited by just 12% of Gen Xers and 10% of Boomers, BMO’s report explains.
“Sixteen percent of Millennials indicated they don’t know what their investing
options are, a reason cited by 13% of Gen Xers and only 7% of Boomers.”
BMO urges retirement savers “not to turn a blind eye to
assessing the right plan for your life.”
“With each contribution you’re making an investment, so
ensure it’s the best investment based on your age and your retirement goals,” Slade
concludes. “That means drafting a plan and knowing how much you’ll need once
you retire. Also, as major life events occur (such as getting married or buying
a home), reevaluate your plan and adjust your contributions accordingly.”
Other findings from BMO show there is “an important
distinction to be made between saving and investing,” but these two terms are
often used interchangeably. BMO researchers draw the distinction as follows: “Saving
is the act of setting aside funds for a purpose other than day-to-day spending.
Investing involves earning growth from these funds that can be used to accomplish
chosen goals. Savings occur in the short term, while investing is a longer-term
discipline to make the most of savings over time.”
Survey participants were asked to describe their saving and
investing preferences. BMO says it is interesting to note that respondents were
“usually on one side or the other of this short-term vs. long-term approach to
saving and investing.” When asked about their top three saving or investing
options, a significant number of respondents chose short-term savings options
that include putting the money aside to decide later (22%) and accumulating
funds in a term-deposit or savings account (19%). Millennials were notable in
that they were more likely to be short-term in their approach, as they were
less inclined to buy and hold for the long term (32%) as compared to Gen Xers
(40%) and Baby Boomers (43%).