Compliance April 8, 2019

Supreme Court Asked to Review Chevron Case for ERISA Pleading Standards

Specifically, the petition filed by participants in Chevron's DC plan asks the Supreme Court to answer: “In pleading a breach of fiduciary duty under ERISA, is it sufficient for a plaintiff to allege a deficient decision-making process indirectly through inferences from the facts known to her?”

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The plaintiffs in an Employee Retirement Income Security Act (ERISA) lawsuit against Chevron Corporation and its defined contribution (DC) plan committee have filed a petition with the U.S. Supreme Court.

Specifically, the petition for writ of certiorari asks the Supreme Court to answer the question: “In pleading a breach of fiduciary duty under ERISA, is it sufficient for a plaintiff to allege a deficient decision-making process indirectly through inferences from the facts known to her?”

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The lawsuit alleges that Chevron and its DC plan committee breached their fiduciary duties of loyalty and prudence by, among other things, offering a money market fund rather than a stable value fund as a capital preservation option and paying excessive administrative fees. Agreeing with a federal district court that the plaintiffs did not allege sufficient facts to support a plausible claim, the 9th U.S. Circuit Court of Appeals in December said the complaint must allege “factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged,” and where there are “two possible explanations, only one of which can be true and only one of which results in liability, plaintiff cannot offer allegations that are ‘merely consistent with’ [its] favored explanation but are also consistent with the alternative explanation.”

The petitioners—participants in Chevron’s DC plan—say the 9th Circuit applied unnecessarily high pleading standards, “precluding petitioners from pursuing claims that have been recognized as sufficiently plead in other circuits.” They note that the 8th U.S. Circuit Court of Appeals in Braden v. Wal-Mart Stores recognized that ERISA plan participants do not have access to the details of how their fiduciaries discharged their duties and thus cannot plead directly how the fiduciaries’ decision-making process was deficient. “The Eighth Circuit recognized that requiring a participant to plead facts that tend systemically to be in the sole possession of the defendant-fiduciaries would undermine ERISA’s remedial scheme of enforcement through participant-led actions. Therefore, the Eighth Circuit established that an ERISA plan participant can state claim of breach by pleading facts that show only indirectly that it is plausible the fiduciary acted imprudently,” the petition says.

The petitioners note that is a standard that has been accepted in the 2nd, 5th, and 7th Circuits, and that even the 9th Circuit has agreed with the principles underlying Braden. “Petitioners’ allegations would survive dismissal under the Braden standard, as many district courts have concluded when considering complaints far less detailed than the complaint in this case,” the petition suggests.

The plaintiffs in the lawsuit say the Supreme Court should grant their petition because “The standard by which a participant can plead a claim of breach of ERISA’s fiduciary duties is an issue of national importance because of the national scope of the statute and because the Secretary of Labor opposes heightened pleading requirements for such actions.”
Client Service April 8, 2019

New Resource Details Social Media Opportunities, Potential Pitfalls

While some six in 10 advisers describe themselves as social media experts, only about 15% actually demonstrate social media mastery.

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The use of social media for business purposes by financial advisers has matured rapidly during the last decade, says Jayme Lacour, Putnam’s social media director.

Citing the newly released Putnam Investments Social Advisor Study, Lacour says it is no longer a question of whether a financial professional uses social media, but rather how they make use of it. Nearly all U.S. financial advisers (98%) are using social media for business and/or personal use at this point, Lacour says, with 83% using it for business purposes.

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Having worked in the social media leadership role at Putnam for about a decade, Lacour says the growth in social media usage by advisers has been explosive, especially in the last five years. As Lacour points out, advisers are feeling increasingly confident in their use of social media, with six in 10 now calling themselves social media experts. This is up dramatically from 46% last year, Lacour notes, and probably indicates some degree of over-confidence.

“We are certainly happy to see advisers feeling confident and eager to utilize social media,” Lacour says. “At the same time, we encourage advisers to be strategic in their approach and to take the necessary time to manage their social media presence effectively. When we have conducted reviews of advisers’ social media activities, it is more like 15% who are demonstrating highly skilled approaches.”

Navigating social media as a private individual can itself be a nuanced task, and so it is only natural that adding business interests into the mix generates even more complexity. Putnam, for its part, has published quite detailed social media operations guides to help advisers maximize their use of new communications platforms and emerging technologies—and to avoid making some common and potentially costly mistakes. More recently, the firm has also developed what Mark McKenna, head of global marketing, Putnam Investments, calls bite-sized strategies for improving social media usage immediately. These are available for all advisers to utilize via https://www.advisorsaresocial.com/.

According to the 2019 survey, among advisers not currently using social media for business, 28% are “absolutely certain” that they will start using it for business in the next three years, up from just 9% last year. McKenna and Lacour agree that this is perhaps one of the most important findings from the latest edition of the survey, showing that advisers have, for the most part, abandoned their reticence about using social media. Not only have social media platforms become a leading communications pathway for older and younger Americans alike, advisers are having success turning social media contacts into new business opportunities. According to the Putnam survey, the vast majority of advisers that have used social media for business purposes report having gained new clients and new assets for their efforts.

“Advisers report using their social media expertise to make initial contact with referrals from existing clients, to acquire new clients and to increase assets under management,” McKenna observes. “Almost half of advisers strongly agree that social media has changed the nature of their relationship with their clients, up from 39% last year.”

One notable survey finding in this area shows that more than two-thirds of advisers say they have more frequent communication overall with clients as a result of social media; yet 44% note that they connect with their clients less often by phone or in person than before. This means social media can help advisers create stronger relationships while also saving time and resources.

Lacour and McKenna suggest this finding reflects broader trends occurring in the U.S. society relating to digital-based relationships and the growing role of technology as a core component of client service. When it comes to digital communications, the survey shows seven in 10 advisers say it is easier to share information with their clients in this manner, while 57% say the connectivity inherent in social media platforms makes collaborative decisions faster and easier.

According to the survey, in terms of use for business purposes, LinkedIn continues to be the platform of choice for advisers, where they follow companies, comment on or share others’ updates, request recommendations and post to groups or pages. Advisers also are increasing their use of LinkedIn for business development by connecting with other financial professionals, enhancing current client relationships, cultivating prospective clients and expanding their professional knowledge.

“Each of the major social media networks is preferred for different reasons, with LinkedIn favored for improving referral networks, Facebook for enhancing current client relationships and Twitter for business development initiatives such as thought leadership,” McKenna says. “Additionally, advisers are increasing their use of YouTube, Instagram and Snapchat, often using them at rates approaching those of the more established social networks.”

Putnam’s research also provides a profile of advisers gaining the most assets from social media use, relative to their total assets under advisement. Of the small group of advisors whose assets have already increased through the addition of clients generated through social media by 10% or more of the total previous AUA, close to half are between the ages of 30 and 39. Furthermore, this group’s average assets under advisement gained through social media is three-times the average for all advisers in the study.

According to the survey, these social media maximizers are more likely to pay for enhanced services from LinkedIn, and they are more likely to have been trained on social media by a colleague from their firms or offices—or by a wholesaler or representative from an investment partner firm. A majority of this select group, according to Putnam, is working to integrate social media data directly into their customer relationship management (CRM) system.

McKenna, encouraging advisers to read the full 2019 survey report, highlights that the survey was conducted in collaboration with NMG Consulting. It included participation by 1,021 financial advisers across the United States who have advised clients for more than two years.

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