Compliance November 11, 2020

Participants Sue Amway Over Excessive Fees

Plaintiffs claim that as a jumbo plan, Amway had substantial bargaining power regarding investment fees and expenses.

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Former participants in the Amway Retirement Savings Plan have filed a lawsuit accusing fiduciaries of breaching their duties under the Employee Retirement Income Security Act (ERISA) by failing to monitor appropriate investment costs.

Plaintiffs claim that at all times during the class period, which runs from November 9, 2014, through the date of judgement, Amway’s retirement savings plan had at least $1.1 billion in assets under management, qualifying it as a jumbo plan in the defined contribution (DC) space. As a jumbo plan, plaintiffs say, the plan had substantial bargaining power regarding investment fees and expenses. Instead, plaintiffs claim the defendants—including various retirement plan committees and Alticor Inc., the corporate parent of Amway—did not attempt to reduce the plan’s expenses or exercise appropriate judgement to scrutinize each investment option within the plan to ensure it was prudent.

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Additionally, the complaint says defendants continued to offer certain funds in the plan despite the availability of identical or similar investment options with lower costs and/or better performance histories and failed to control the plan’s recordkeeping costs by using revenue sharing.

The complaint further states that the company, acting through its board of directors, had a fiduciary duty in monitoring and supervising the plan’s investment committee.

The lawsuit seeks to determine that defendants had breached their fiduciary duty under ERISA, to make good on all losses to the plan resulting from the fiduciary breach during the class period, and for actual damages in the amount of losses to be allocated to participants’ individual accounts. The complaint also requests that an independent fiduciary or fiduciaries be added to run the plan in place of any fiduciaries deemed to have breached their duties.

In a statement to PLANADVISER, Amway said, “Amway has always been fair, generous, and competitive in its delivery of retirement benefits. We stand by the management of the Retirement Savings Plan we offer, and we will vigorously defend against these baseless accusations.” 

Deals & People November 11, 2020

Baystate Fiduciary Advisors Latest to Join HUB International

The pandemic-triggered recession has not slowed down merger and acquisition activity in this space, as yet another PLANADVISER Top 100 firm has been acquired by HUB International.

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HUB International has announced that it has reached an agreement to acquire Baystate Fiduciary Advisors, a well-established retirement plan specialist advisory firm located in Boston.

The deal represents a continuation of HUB’s streak of buying leading retirement plan advisory firms. The drumbeat of deals started back in January 2019, when HUB announced the acquisition of Sheridan Road Financial, and the buying continued in September 2019, when Hub announced in rapid succession six acquisitions of firms that were part of Global Retirement Partners (GRP).

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That round of acquisitions brought on board EPIC Retirement Services, StoneStreet, Washington Financial, Perennial Pension & Wealth, WhartonHill and Inter-Mountain Retirement Partners (MRP). Late last year, the global insurance firm continued to grow its lineup of retirement plan specialists with the addition of two New York-based advisers.

The newly announced acquisition of Baystate fits in the vein of the previous purchases. Baystate, which has been repeatedly recognized as a PLANADVISER Top 100 designee in the small team category, offers fiduciary advisory services predominately to 401(k) and 403(b) plan sponsors, with both a general business approach and a concentration in the nonprofit sector.

Baystate Fiduciary Advisors manages $2.9 billion in assets and services as of September, though the full financial details of the HUB acquisition have not been released. As part of the deal, Gregg Andonian, managing partner of Baystate Fiduciary Advisors, will join Hub Retirement and Private Wealth (Hub RPW) in New England. With this latest deal, Hub RPW manages more than $93 billion in assets.

In addition to the firm earning the Top 100 recognition, Andonian has also been profiled as a “sales champ” in PLANADVISER magazine.

Considering the momentum of these deals and the company’s plainly stated ambition to become one of the leading providers of retirement planning and health benefits in the U.S., it is likely that HUB’s acquisition streak is still far from finished. The same is likely true for other aggregators, such as OneDigital and CAPTRUST. These aggregators continue to benefit from the scale pressures and other technical business challenges that are leading many independent advisers to seek to join forces with larger, better-resourced financial services entities.

This theory is borne out by Fidelity’s freshly updated adviser merger and acquisition (M&A) report for October. The month posted 13 adviser-focused deals representing $19.1 billion in assets, marking the fifth consecutive month with 12 or more transactions representing at least $12 billion. Since Fidelity began tracking adviser-focused acquisitions in 2016, only five individual months have exceeded these totals. Year to date, there have been 96 such transactions, representing $122.9 billion. Fidelity says this is nearly the same activity level as the year-to-date figure for October 2019—despite an extremely slow March, April and May in 2020.

“2020 is proving to be an incredibly robust year for M&A, showcased in the healthy activity experienced over the last five months,” says Scott Slater, M&A specialist and Fidelity institutional vice president of practice management and consulting. “Despite record-low activity in the early months of the coronavirus pandemic, the [adviser] industry has seen nearly the same activity level as a year ago, with that strong pace expected to continue as we begin to close out the year.”

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