TIAA to Pay $97 Million in 2025 Settlement Over Misleading Investment Practices

Regulators have uncovered conflicts of interest among TIAA advisors, leading to a major settlement.

TIAA-CREF has consented to pay $97 million to nearly 20,000 clients to resolve claims that its New York-based broker-dealer and advisory services misled investors by encouraging costly individual accounts instead of affordable employer-sponsored retirement plans.

Key Highlights

• TIAA-CREF’s subsidiary, TC Services, will compensate around 20,000 clients who opened Portfolio Advisor accounts between January 2012 and March 2018.
• The settlement addresses deceptive sales tactics where clients were persuaded to move funds from low-cost retirement plans to higher-fee individual accounts.
• The investigation was a joint effort by the U.S. Securities and Exchange Commission (SEC) and the New York State Attorney General’s office.
• TIAA has committed to implementing extensive internal reforms and proactively contacting affected investors.

Details of the Charges

Following multiyear probes, TIAA-CREF Individual & Institutional Services (TC Services) reached an agreement with regulators on July 13, 2024, addressing conflicts of interest in advisor recommendations.

The SEC found that between 2012 and 2018, advisors encouraged clients to withdraw assets from employer-sponsored retirement plans to open individual managed accounts under TIAA’s Portfolio Advisor program without fully disclosing compensation incentives or fee structures.

Investigators revealed that advisors failed to provide clear and accurate information about fees and performance, while the Portfolio Advisor accounts incurred significantly higher costs, generating hundreds of millions in fees for TIAA.

Regulators also found that sales representatives misrepresented themselves as "objective" and "non-commissioned," despite being financially motivated and pressured to identify clients’ "pain points" to boost sales.

The SEC and New York Attorney General’s office highlighted that the original employer plans offered better risk-adjusted returns and projected outcomes compared to the costly Portfolio Advisor accounts.

These practices violated federal securities laws and fiduciary responsibilities, according to the SEC’s administrative order.

Fiduciary Duty vs. Suitability Standard

The case underscores the critical difference between fiduciary standards, which require acting in clients’ best interests, and suitability standards, which only ensure that recommendations are appropriate.

Although TIAA trained advisors to present themselves as fiduciaries providing impartial advice, the financial incentives tied to switching clients nullified this claim.

Commitments to Reform

TIAA agreed to comprehensive changes, many of which began in 2017, including:

• Applying strict fiduciary standards to all rollover recommendations.
• Removing differential compensation for managed account sales.
• Disclosing or eliminating conflicts of interest related to managed account recommendations.
• Using clear language to inform clients when advisors are not acting as fiduciaries.
• Training advisors to fairly compare managed accounts with employer-sponsored plans.

Client Compensation and Outreach

The $97 million settlement includes refunds of fees, interest, and penalties, which will be distributed to eligible clients who opened Portfolio Advisor accounts with retirement plan assets during the covered period.

TIAA has pledged to contact affected clients directly to address concerns and provide support.

"We cooperated fully with regulators and are pleased to resolve issues from a period ending over three years ago," a TIAA spokesperson stated.

"Valuable lessons learned have driven enhancements in our training, oversight, and disclosures, many of which were implemented before regulatory investigations began," they added.

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