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401(k) Robo Advisor Class Action Closed

Participant-plaintiffs in a 401(k) robo-advisor class action suit have dropped their case.

The lawsuit, filed in January 2017 in the U.S. District Court for the Northern District of Illinois, had alleged that at defendant Hewitt Associates’ urging, plaintiff Cheryl Scott, a retiree and participant in the Caterpillar Plan – “and thousands like her in the Caterpillar Plan and other similarly-situated retirement plans for which Hewitt provided recordkeeping services” – purchased retirement investment advisory services for a “hefty fee.”

The suit had alleged that “…at no time during the period when Financial Engines was providing investment advice directly to Caterpillar Plan participants did Hewitt directly notify Ms. Scott or other similarly-situated Plan participants that Hewitt was taking a 20-25% kickback on the amounts paid to Financial Engines for ‘managed services,’” though that was disclosed in filings with the Labor Department.

Earlier this year that claim was rejected by U.S. Magistrate Judge Jeffrey T. Gilbert. That action (Scott v. Aon Hewitt Financial Advisors, LLC, N.D. Ill., No. 1:17-cv-00679, stipulation of dismissal 11/28/18) has now come to an end, with a “stipulation of dismissal with prejudice” in the case, with each party to “bear their own attorneys’ fees and costs.”

Nor is that unusual; several similar lawsuits have been filed alleging that the arrangement between Financial Engines and various recordkeepers. To date, cases against Voya Financial, Fidelity and Xerox have all been rejected.

The plaintiff in the case was represented by Massey & Gail LLP, Berger & Montague PC, and Schneider Wallace Cottrell Konecky LLP, while Aon was represented by Jenner & Block LLP.