Edward Jones is facing a lawsuit from investors who say they were charged unnecessary fees when the company switched them from commission-based to fee-based accounts, FA magazine writes.

The suit, filed in the U.S. District Court, Eastern District of California against Edward Jones, several senior executives and two of the company’s subsidiaries, alleges the firm pressured its advisors to transition mostly inactive clients into fee-based accounts even though they would have paid less if they remained in commission-based ones, according to the publication. The company did so “under the guise” of complying with the Department of Labor’s fiduciary rule, the complaint alleges, FA magazine writes. The rule, which purports to require retirement account advisors to put clients’ interests first, went into partial effect last summer but was vacated in appeals court last month.

The plaintiffs, who describe themselves as “unsophisticated investors,” accuse Edward Jones of “orchestrating this scheme to churn revenue from essentially dead assets” on behalf of investors whose accounts were transitioned between March 2013 and March 2018, according to the complaint cited by FA magazine. A lot of the investors’ money whose accounts were switched over to fee-based models was invested in proprietary mutual funds launched by Edward Jones in 2013, according to the complaint, the publication writes. The complaint says that assets in the company’s fee-based programs soared from $101 billion in 2013 to $265 billion in 2017, according to FA Magazine. Fees in these accounts are between 1.35% and 1.5% but can reach as high as 2%, according to the complaint, the publication writes.

Edward Jones is reviewing the complaint, according to a statement cited by FA magazine.

“Edward Jones has consistently offered both fee-based and commission-based client accounts that adhere to all regulatory requirements. We believe Edward Jones client accounts are among the best options in the industry, and we intend to vigorously defend this action,” according to the statement cited by the publication.

Edward Anderson, one of the four plaintiffs in the suit, agreed to Edward Jones’ Advisory Solutions Fund Model Agreement in 2015 and had about $61,000, or 60% of his assets, put into the company’s proprietary Bridge Builder mutual funds, according to the complaint, ThinkAdvisor writes.

Edward Jones HQ, St. Louis (pic credit: Jim Wolfe)

He ended up paying more than $6,000 in fees, the suit alleges, according to the publication. Another plaintiff had $22,000, or about 32% of his assets put into Bridge Builder despite his instructions to the advisor to keep his accounts unchanged, and paid $671 a year in fees overall, according to the suit, ThinkAdvisor writes. A third plaintiff had $53,000, or about 38% of her assets, put into Bridge Builder and ended up paying more than $2,130 in fees, according to the complaint cited by the publication.