TIAA needs to litigate cross-selling lawsuit

A lawsuit against TIAA’s cross-selling a managed account service will proceed after their motion to dismiss was denied by a federal district court judge in New York.

John Carfora, Sandra Putnam, and Joan Gonzales sued TIAA in the U.S. Southern District Court of New York alleging that TIAA breached its fiduciary duties to participants ERISA for cross-selling their adviser-managed account service known as Portfolio Advisor, which comes at a higher cost than remaining in the plan that these participants were in.

The plaintiffs were participants in different university-defined contribution plans serviced by TIAA, but aren’t suing the schools for breach of fiduciary duty.

U.S. District Court Judge Katherine Polk Failla denied TIAA’s motion to dismiss and stated that the lawsuit shows “in great detail the systematic efforts on TIAA’s part to drive members from their ERISA plans and into TIAA-sponsored offerings, with little upside to those participants.”

The lawsuit claims that TIAA placed participants into individual model portfolios that often included TIAA-affiliated funds, which had higher fees than if they kept their assets in the employer-sponsored plan. The lawsuit also alleged TIAA advisers cold-called participants by offering free financial planning services but with the undisclosed intent of moving participants to the managed account offerings.

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