Whistleblower TIAA-CREF Complaints Threaten the Firm’s Sterling Reputation

TIAA Complaints

Public service workers are the backbone of society, working tirelessly and passionately to create the future leaders of tomorrow and improve conditions for people of every stripe and station in life. These professionals offer their knowledge and skills in the service of humanity, and while they are not always well rewarded for their efforts, many enjoy the opportunity to participate in favorable retirement plans that ensure they are taken care of later in life.

Because of their focus, many professionals in educational, administration, research, and other public service fields don’t necessarily have the knowledge, time, or experience to manage financial investments on their own. They rely on other trusted professionals to do this for them. What happens when financial services organizations take advantage of that trust to urge clients to purchase investments that are not necessarily in their best interests but are to the benefit of the firm selling them?

When such cases come to light, they result in a breakdown of trust that harms not only the clients and companies involved but the integrity of the industry as a whole. This is exactly what has happened with the recent spate of TIAA-CREF complaints. Here’s what investors need to know to protect themselves and their interests.

What is TIAA-CREF?

Until recently, TIAA-CREF, which has rebranded itself 1 simply as TIAA, or the Teachers Insurance and Annuity Association (the College Retirement Equities Fund or CREF was dropped last year), had a reputation as one of the best financial services organizations catering to public service workers like educators, administrators, researchers, nurses, government employees, and more. With over 5 million clients (active and retired employees), over 15,000 participating institutions, and nearly a trillion dollars in assets, TIAA is a giant in the financial services industry.

The company promotes itself as a mission-based organization and touts a long history of nonprofit heritage, both of which speak to a commitment to working in the best interests of clients. Indeed, the company began as a nonprofit organization almost exactly 100 years ago. It was created in 1918 by Andrew Carnegie and the Carnegie Foundation for the Advancement of Teaching, with full funding provided by grants from the foundation.

As of 1997, however, the organization’s nonprofit status was revoked 1 by Congress, and the company subsequently changed its funding model to become a for-profit financial services corporation. Although TIAA maintains that it has retained the ideals of a nonprofit organization, several insider TIAA-CREF complaints seem to prove that assertion untrue, to the detriment of clients.

Whistleblower Allegations

According to confidential whistleblower allegations filed with the Securities and Exchange Commission (SEC), the company began adopting more aggressive sales tactics 1 as early as 2002 in a bid to generate revenue and compensate for clients retiring, and also moving their accounts to other investment and wealth management providers. The pending TIAA-CREF complaints include a number of underhanded and illegal strategies designed to push clients into more costly retirement plans and investment options that weren’t necessarily in their best interests.

Former employees have insisted that TIAA management encouraged employees to use aggressive sales tactics to push clients into purchasing higher-cost plans and investment products, including applying pressure to “pain points,” such as the fear of not having enough money to live comfortably during retirement. Why would employees do this? According to allegations, they were given quotas and financial incentive.

TIAA claims that employees are not offered rewards in the form of commissions, but TIAA-CREF complaints state the opposite. In the SEC filing, former employees state that sales personnel were not only burdened by unreasonable sales quotas, but they were rewarded with bonuses anytime they convinced clients to choose more expensive products offered by TIAA. What happened to employees that wouldn’t play ball? According to complaints, they were “processed out.”

TIAA Response

TIAA has responded to complaints and allegations of wrongdoing with emphatic denial. TIAA spokesman Chad Peterson has stated that the company continues to operate in “a highly transparent and ethical way,” going on to claim that “retired participants have never missed a payout from us – through depressions, wars and natural disasters.” Since 1918, the organization has paid out $394 billion 1 to retired participants, according to Peterson.

A statement on TIAA’s website says, 3 “At TIAA, we hold everything we do to our guiding principles. We’re united by a shared vision to take care of people, act with integrity, and deliver excellence.” For much of the century that the company has been in operation, this may have been true, and it’s likely how TIAA-CREF developed such a sterling reputation. Today, however, the shift to a for-profit corporation seems to have impacted both operations and the company’s once-unshakable reputation.

Legal Concerns

Fortunately, retirement accounts and related investments are protected under certain legal standards, like the Employee Retirement Income Security Act 4 (ERISA), as well as the new Department of Labor Fiduciary Rule 5. These include specifications regarding the behavior of investment advisors, insomuch as they are required to act as fiduciaries.

Fiduciaries are legally obligated 6 to act solely in the best interests of clients (participants and beneficiaries) at all times, especially when offering investment advice. Further, they are not allowed to engage in activities 1 that would benefit them at the expense of client interests, and they must disclose any and all conflicts of interest in order to comply with rules.

Investment advisory and wealth management firms like Gitterman Wealth Management take their legal obligations seriously, not only to remain in compliance with applicable rules and regulations, but because the best interests of clients are of paramount importance. As an SEC-Registered Investment Advisory Firm, Gitterman Wealth Management is a fiduciary, and takes pains to act in a fiduciary capacity in all dealings with clients, including teachers, administrators, and more.

According to TIAA-CREF, complaints and several lawsuits launched against the company 1 (including one filed by employees alleging they were being overcharged for their own retirement accounts) stated that TIAA was no longer living up to its fiduciary responsibility. TIAA has already paid out on several lawsuits alleging wrongdoing and overcharging, with more pending.

What does this mean for the company moving forward? One would hope TIAA adjusts to come into alignment with existing laws, but according to internal documents regarding training, advisors were told to avoid “referencing the participant’s best interest” and “accidentally implying that you may be acting as a fiduciary.” 1


[1] https://www.nytimes.com/2017/10/21/business/the-finger-pointing-at-the-finance-firm-tiaa.html?mwrsm=Email
[2] https://www.tiaa.org/public/why-tiaa/who-we-are
[3] https://www.tiaa.org/public/why-tiaa/who-we-are/our-values
[4] http://www.investopedia.com/terms/e/erisa.asp
[5] http://www.investopedia.com/updates/dol-fiduciary-rule/
[6] https://money.usnews.com/investing/articles/2015-12-21/what-exactly-is-a-fiduciary

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Author Jeff Gitterman

Jeff Gitterman is a co-founding partner of Gitterman Wealth Management, LLC, and a thought leader in the field of Sustainable, Impact, and ESG (Environmental, Social, and Governance) Investing. He is the creator of his firm’s SMART (Sustainability Metrics Applied to Risk Tolerance)® Investing Services, which offer investment opportunities for individual clients, as well as research and investing services for other financial professionals in the Sustainable, ESG, and Impact arenas.

Noted as an “ESG expert” by Financial Advisor magazine, Jeff has also been featured in the past in Money Magazine, Barron’s, Morningstar Magazine, The Wall Street Journal, CNN, and Affluent Magazine, among many others.

Jeff deeply believes that the migration of investor capital towards more Sustainable, Impact, and ESG investments is one of, if not the most effective way to help realize the United Nations’ Sustainable Development Goals (SDGs), and he is committed to helping both investors and other financial professionals navigate the rapidly growing Sustainable, Impact, and ESG Investing landscape.

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