You'd be hard pressed to find a class action suit that hits as many hot-button issues as Ameriprise employees' complaint that their own firm charged them too much for proprietary funds.
Six current and former employees argue that Ameriprise and its 401(k) plan administrator failed to live up to their fiduciary obligations by steering their money to an overly expensive class of in-house mutual funds.
As they point out, Ameriprise stuffed its plan with proprietary RiverSource and Columbia options that generally cost about 70 basis points more in fees than low-cost alternatives.
Moreover, the plan reputedly didn't even make an effort to get participants into the cheapest class of in-house funds available. That cost these workers another 17 to 34 basis points a year.
That fee lag, they say, added up to $20 million between 2005 and 2007.
Ameriprise is defending itself by calling this a copycat suit similar to what the same lawyers have filed against other companies in the past.
Unfortunately, as a broker-dealer with a proprietary shelf of funds, Ameriprise is not just another company making more or less suitable choices for its plan.
Stuffing the plan with proprietary product means that the firm could, in the vernacular, "eat its own dog food" to the tune of about $500 million a year in more-or-less captive flows.
From here, that looks like a stunning conflict of interest even if the firm disclosed its relationship to the funds in question.
And then there's the issue of the funds' reputation. If even the in-house team says they feel cheated, what are Ameriprise clients to think?
The employees want to be made whole, complete with lost opportunity costs. That last part might not fly so high in court. After all, retirement plans pick less-than-perfect funds all the time.
But as for the expenses, this is a moment when the fiduciary duty of plan sponsors is already a sensitive topic on Capitol Hill. Reminding lawmakers that even the employees of the brokerage firms themselves want more than just a suitability standard and disclosure may turn the game around.