A former financial advisor at Fidelity Investments has accused the company of firing him after he raised concerns that the company was putting undue pressure on advisors and branch managers to get clients to invest with high fees. A lawsuit is being filed.
Michael Maker, Branch Manager, said: “We continue to encourage Maker to push customers into inappropriate or reckless, high-fee-generating financial investments where Fidelity makes more money, regardless of the investors’ best interests. pressure,” the complaint states.
Manufacturer’s lawsuit, filed May 6 in federal court in Texas, seeks monetary damages.
“Fidelity denies and vigorously defends all claims made by this former employee, including termination,” a Fidelity spokesperson said in a statement.
Fidelity is one of the largest wealth and wealth management companies in the United States, serving more than 50 million individuals. The Boston-based company manages $13.7 trillion in assets.
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Mr. Maker’s lawsuit alleges that Fidelity used a combination of carrots and sticks to pressure branch managers and advisors to steer customers toward higher-fee products such as actively managed mutual funds instead of lower-cost index funds. For example, the company allegedly distributed a chart that ranked branch managers in a given region based on the amount of investors’ assets in high-fee investments. “A significant portion of Fidelity’s branch managers’ compensation was based on the amount of investor assets invested in Fidelity’s higher-earning financial products,” the complaint states.
Mr. Maker’s managers distributed weekly report cards to advisors, ranking them based on the amount of client assets invested in “Tier 3,” an internal designation for high-fee investments. The report card sent a “strong and clear message.” [financial advisors] “They did not promote customers to Tier 3 because their work performance was below Fidelity’s expectations,” the complaint states. When clients wanted to move their investments from actively managed funds to lower-cost index funds, Mr. Maker’s managers asked them to persuade them to change direction, according to the complaint. Mr. Maker refused, and his manager was “not satisfied,” the lawsuit says.
According to the complaint, Fidelity Advisors were ranked based on how much of their clients’ assets they placed in “low-fee alternatives such as U.S. Treasuries, CDs, and index mutual funds that put clients’ best interests first.” He said he had not received his report card.
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The lawsuit alleges that Mr. Maker was fired in December 2022 for reporting misconduct to other Fidelity employees and for filing a complaint with the Department of Labor’s Occupational Safety and Health Administration (Osha) in September 2022. He claims it was retaliation for the incident. Osha investigators handed down the initial dismissal, and Mr. Maker appealed it to an administrative judge at the Department of Labor, according to the complaint.
A Fidelity spokesperson, referring to the performance issues the company had raised regarding Mr. Maker, said that Osha’s investigators said, “Mr. Maker would have been removed from his position for misconduct, unrelated to the purported whistleblower activity.” ” he concluded. In other words, Fidelity did not retaliate against him. ”
Mr. Maker’s attorney, Lodge Dunn of the Dallas-based law firm Lodge Dunn Group, disputed Fidelity’s findings regarding Osha’s response, and Osha has not issued a formal ruling on the merits of Mr. Maker’s case. He said he had not. “Mr. Maker’s whistleblower exposes Fidelity’s investment practices that are of interest to those who trust Fidelity with their investments,” Dunn said.
Mr. Maker, who worked in Dallas, began his career as an advisor at Merrill Lynch in 1996. Mr. Maker was registered with Fidelity from 1998 to 2022, according to BrokerCheck, a public database maintained by industry self-regulatory organization Finra. He has no customer complaints on his BrokerCheck record. His lawsuit says his work performance at Fidelity and his annual evaluation record were “impeccable.”
Maker’s lawsuit says the push to invest client assets in products with higher fees began in 2019, when the company appointed a new branch manager to his office. The complaint said Mr. Maker was recorded criticizing branch managers for not allocating customer assets to products with higher fees.
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Fidelity arrested him in 2022 for allegedly misrepresenting customer interactions and improperly using a planning tool without verifying with customers the accuracy of information they entered, according to a memo the company placed on his BrokerCheck record. He was fired in December. “These actions inflated employee performance metrics,” the memo said.
Mr. Maker disputed Fidelity’s claims, according to his response posted on BrokerCheck. “Fidelity’s allegations against me are false and their statements are misleading and intended to damage my career,” his response said.
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His lawsuit says his termination from Fidelity and the reason for his termination listed in official regulatory records precluded him from seeking new employment elsewhere.
“Fidelity’s unlawful retaliation and wrongful termination of Mr. Maker has caused him millions of dollars in damages, emotional distress, and defamation,” the complaint states.
Email Andrew Welsh at andrew.welsch@barrons.com.
