Lawsuits on Proprietary Funds Rising

What are the dangers of using the proprietary investments of a record keeper? Lawsuits. In fact, over the last decade or so, there have been 18 claims filed, including recent ones filed against MassMutual and Fidelity, as chronicled in a detailed chart compiled by the Groom Law Group.

While there is a move away from prop funds, as suggested by a recent McKinsey study, the top three TDFs and many in the top 10 use only prop funds. So whether it’s the record keeper suggesting their own funds or the TDF manager doing the same, there is some risk — and more law firms likely to exploit this opportunity, emboldened by the success of Jerome Schlichter’s firm.