Firm Accused of Pushing Clients Into Fee Based Accounts Over Commission

by Structured Settlement Watchdog

Is an asset under management (AUM) fee structure for structured settlements better for plaintiffs in personal injury lawsuits as some proponents advocate?   Maybe, but maybe not, as a recently filed class acton lawsuit against Edward Jones indicates.

Edward Jones accused of breach of fiduciary duty for moving clients OUT OF commission accounts and into fee based advisory accounts

 "Not for Nothing"

A group of investors, described as "unsophisticated investors"  in a class action lawsuit against Edward D.Jones & Co. LP, two of its subsidiaries and several senior executives,  has alleged that they were charged unnecessary fees that amounted to a violation of the firm's fiduciary duty.  

Material to the discussion is that the Edward Jones case turns on allegations of a reverse churn revenue operation from March 2013 to March 2018,  in which advisors moved largely dormant assets into the fee-based side of the practice, when the commission model would have better served the clients. 

In a 2017 SEC filing Edward Jones explained the move away from commission based retirement investments following the Department of Labor's fiduciary rule.

It is interesting that In some of his unabashed advocacy for a fee based structured settlement compensation model, Sequence Media's Mark Wahlstrom makes a similar statement as Edward D.Jones under the section of the Edward Jones brochure entitled “Comparing Costs and Expenses,”  namely:

"A financial advisor will typically earn more in upfront fees and commissions when
you use brokerage services. In the alternative, a financial advisor will typically earn
more over time if you invest in Advisory Solutions".

The class action lawsuit complaint against Edward Jones alleges, at 84,

"This statement misleadingly implied that a similar amount in fees would be charged
whether utilizing commission-based brokerage services or fee-based Advisory Solutions, but that
the fees will simply be paid over time in Advisory Solutions rather than immediately upfront in
commission-based accounts. In truth, Plaintiffs and the other Class members paid substantially
more in fees after Edward Jones moved their commission-based accounts into Advisory Solutions" (emphasis added)

See Anderson et al v Edward D. Jones & Co. LP  et al.  United States District Court Eastern District of California 2:18-cv-00714-JAM-AC