Fidelity whistleblower alleges he was fired for raising red flags over pressure to sell pricey investments
A former Fidelity financial advisor has accused the brokerage of unlawfully firing him after filing a whistleblower complaint. In a lawsuit filed on May 6, the ex-employee alleged that Fidelity pressured advisors to push pricier investments on clients, which generated higher fees for Fidelity.
The advisor, Michael Maeker, made a total of seven whistleblower complaints to Fidelity management and internal investigators in 2019 and 2022, alleging that the firm’s sales practices fell foul of regulations that require firms and financial advisors to act in the best interest of investors, known in the industry as Reg BI. He also filed a complaint to the Department of Labor that was initially dismissed. An appeal is pending.
He said he was fired in 2022 after 24 years at the firm. Fidelity accused him of improperly sending retirement analysis reports to three clients without speaking to them on the same day. This complaint is now on his record with the Financial Industry Regulatory Authority (FINRA), Wall Street’s self-regulator. With this accusation on a previously clean record, he said he struggled to find work as a financial advisor. At one point, he took a job in Home Depot’s paint department to support this family.
Fidelity ranked branch managers by the number of client assets in more expensive investments such as stock-managed accounts, Maeker said. The manager of Maeker’s branch in Dallas put this pressure on financial advisors by sharing “Hero Cards” that ranked them by the same measure. Financial advisors who did not score highly were awarded little to no stock or threatened to be fired, Meaker said.
Treasury bonds and mutual funds generate little in fees for Fidelity as brokerages have slashed their fees in order to compete. This race to zero has led to more pressure on high-fee products, as Maeker’s branch manager told him.
“The model you described, kind of set it, forget about it, in funds. That was viable for us [Fidelity] for decades, and now we’re bleeding,” the branch manager said, according to a cited recording.
Fidelity denied all the allegations in a statement to Business Insider. The brokerage plans to “defend itself vigorously,” a spokesperson said.
“Mr. Maeker’s complaint was already reviewed and dismissed by an OSHA investigator who concluded, among other things, that Mr. Maeker would have been removed from his role due to his misconduct regardless of his purported whistleblowing activity,” she said.
Maeker, who joined an independent financial advisory two months ago, is now suing “for reinstatement to his former position” at Fidelity or millions in damages, including back pay, owed commissions, and the value of forfeited stock. The complaint has been filed in the federal court for the Northern District of Texas in Dallas.
How Fidelity pressured advisors to upsell clients
Fidelity ranked financial products in three tiers, according to the complaint. Low-fee products like CDs fell under Tier 1, while Tier 3 included separately managed accounts.
In addition to ranking branch managers by Tier 3 assets, Fidelity tied branch manager compensation to this metric, according to the complaint.
In turn, financial advisors were pushed to sell more Tier 3 investments by awarding 10 times the amount of compensation for Tier 3 investments versus Tier 1. Advisors were ranked by Tier 3 assets with “hero sheets” that were shared by branch managers. These scores were discussed at weekly meetings. Advisors with high Tier 3 sums were given bonuses including Fidelity stock.
When denied a stock award for not netting enough Tier 3 assets, Maeker was asked by his branch manager to say he was “on board” with doing better next year, according to a recording cited by the complaint.
Maeker was fired as a financial advisor in August 2022, two months after his last whistleblowing report to Fidelity’s internal investigator. He was given 60 days to find another job at Fidelity, and his employment ended in December 2022. The following year Fidelity stopped sending performance reports and goals to branch managers that only discussed Tier 3 assets, the complaint said.
This whistleblower complaint comes as FINRA and the Securities and Exchange Commission (SEC) have stepped up enforcement of laws requiring firms to act in clients’ best interests. In 2023, FINRA imposed 22 actions citing violations of these rules, commonly referred to as RegBI, nearly triple the prior year’s total, according to Reuters. In November, the SEC and FINRA forced individual brokers to partially compensate clients, which is unusual for the regulators, Reuters reported.