Tue | Jul 17, 2018

Morgan Stanley accused of mismanaging its pension plan in lawsuit

Published:Sunday | August 21, 2016 | 12:00 AM

Even Wall Street workers are unhappy with how their retirement plans are run.

A participant in Morgan Stanley's 401(k) plan filed a lawsuit Friday in US District Court in New York alleging that it offers investment options that have too-high fees and poor track records, including some mutual funds run by Morgan Stanley itself. The suit accuses the $8 billion plan of causing "hundreds of millions of dollars" in losses for its roughly 60,000 participants.

Morgan Stanley declined to comment on the lawsuit.

Friday's suit is the latest in a lengthening string of complaints about high fees and poor investment choices at 401(k) and 403(b) retirement plans around the country. Franklin Templeton's 401(k) plan was hit with a similar suit last month, for example. Participants filed suits against the Massachusetts Institute of Technology, New York University and Yale University earlier this month.

Each of those defendants, along with Morgan Stanley, has a plan with high ratings relative to peers from Brightscope, which analyses retirement plans.

But Friday's suit alleges Morgan Stanley treated the plan "as an opportunity to promote Morgan Stanley's own mutual fund business and maximise profits" at the expense of its participants, by offering its own funds when it could have offered ones from other providers that had better performance.

As an example, the suit cited the Morgan Stanley Institutional Small-Cap Growth fund, which it said performed worse than 99 per cent of its peers in 2014. Analysts at Morningstar call that fund an "excellent option" but also acknowledge that it's one of the most volatile in its category, "which can make it difficult for investors to stay the course."

- AP