A boss is in charge. A boss is a coach. And whether bosses like it or not, they are often educators too.
Eryn Schultz liked it about a decade ago when, as a supervisor at HEB grocery stores, some hourly workers expressed interest in the company’s 401(k) plan and had questions. But as she continued her education during her time with the company in and around Houston after earning her Master of Business Administration, there were some things she was missing.
The formula for the generous grant was so complex that some of her hourly employees didn’t fully understand how good the grant was. There were not enough educational materials in Spanish, even though Spanish was the native language of many workers. And fees in the mutual funds of the Texas-based company, which employs more than 165,000 people, appeared high.
She took her concerns to the people making retirement plan decisions and felt that most of them disagreed with them. About a year after taking a managerial position at a store overseeing perishable products, she quit—retail hours are tough and frustrations over 401(k)s didn’t help.
Two years later, as her dismay over the pension plan and generally poor financial knowledge continued to torment her, she learned of a class-action lawsuit filed by HEB employees over the plan.
Her parents told her not to take part. A lawyer friend suggested thinking carefully about what it would mean to be associated with a lost lawsuit. Suing an employer – even a former one – is usually not the smartest career advancement strategy, so that was something to consider.
But she did it anyway and she still tears up when she thinks about why. There were people at HEB making $30,000 a year, she said, and they ate Lunchables because the fresh vegetables were expensive. Even if they only got $5,000 from a lawsuit, that would be a life-changing sum.
“I don’t have to work in this industry,” Ms. Schultz, 39, recalled when I met her for coffee at the Bogleheads Money Nerd Conference in San Antonio last fall. “If I can’t add my name, who can?”
About 20 years ago, lawyers began suing companies over their 401(k) plans, arguing that high fees and subpar investment decisions constituted a breach of employers’ fiduciary duty to act in the best interests of their employees.
There were some victories. More importantly, the legal challenges frightened many employers and their advisors. Those in charge began to select funds for the investment plan menu more carefully and paid more attention to costs.
It is not clear how much attention HEB paid to all this, as it did not agree to an interview on the subject.
“HEB is a people company committed to doing the right thing for our partners,” a spokesperson said in an emailed statement. “HEB has made significant investments to provide our partners with robust, world-class benefits, including our 401(k) plans, which we are proud of and which help our partners build strong financial futures. We care deeply about all of our partners, their financial well-being and their retirement goals, and we will continue to vigorously defend against any unfounded claims.”
The lawsuit, which began in 2019, has been going on for a while.
“These financial/complex civil cases can take years,” Federal District Judge Fred Biery of the Western District of Texas, who is presiding over the case, said in an email. “In the current environment, the workload in this part of the country is exacerbated by ICE detentions here and the transfer of detainees from other parts of the country to detention centers within our jurisdiction. As a result, we are inundated with habeas corpus petitions demanding basic due process for people in deportation proceedings.”
The HEB 401(k) plan is absolutely strange. It does not contain any target funds, but rather a mix of investments that automatically become more conservative as the plan participants get older. The vast majority of 401(k) plans now have them.
The HEB plan provides for actively managed funds with different risk profiles. These funds include stocks, bonds and many alternative investments, including private equity. Hedge fund investments in certain 401(k) plan mutual funds are also the subject of the lawsuit.
“This is a highly unusual fund setup,” said Jerry Schlichter, a pioneering lawyer who has sued many employers over their 401(k) plans. The plaintiff’s attorneys in Ms. Schultz’s case (Mr. Schlichter is not involved) object to the plan’s fees, its returns and more.
Ms. Schultz had given a few informal employee presentations about the 401(k) plan at HEB, but she said executives at the grocery chain asked her to stop so it wouldn’t appear as if she was giving investment advice. So she only spoke about the plan when her staff spoke to her and responded only with facts.
But she didn’t lose interest in explaining these things to people. A friend from business school knew of her interest and asked her to give a talk about money to a group of students.
It was Harvard, and Harvard hadn’t taught them enough. Afterwards, someone snuck up on her and told her about her pile of secret credit card debt. Others needed help understanding the nuances of saving for retirement in a pre-tax 401(k) account versus an after-tax Roth account, just like many HEB employees.
The pandemic struck and Ms. Schultz moved to Zoom (and to Austin in 2021). Word of mouth spread. She started charging for her classes. And when people started asking her to be their financial advisor, she received the Certified Financial Planner designation and started saying yes.
Ms. Schultz understands that telling her legal story will make the fee lawsuit part of her personal brand. So what does she charge for her own consulting work?
Four hundred dollars an hour.
That may seem like a lot, but it’s in line with lawyers’ bills and the 50-minute demands of many psychiatrists on both coasts. She deals with tax law and feelings, often in the same quarter of an hour. And yes, she acts as a fiduciary who agrees to act only in the best interests of her clients and not to accept commissions from investment firms.
The hourly rate is targeted. Like many younger advisors, she doesn’t particularly believe in the industry practice of charging people a percentage of their assets under management.
Many otherwise great advisors won’t come close to you unless you have $500,000 or $1 million or more in investments to oversee. If you’re a doctor or lawyer with $300,000 in student loan debt or an entrepreneur with limited cash flow, a whole host of experts will slam the door in your face.
Ms. Schultz has about 70 customers, some of whom come in for just a few hours each year. And she still holds her seminars – that’s about 25 percent of her time and total revenue.
So is Ms. Schultz a stomach-churning woman or a superhero? One day Judge Biery will at least make a legal decision.
In the meantime, she remains a trainer and teacher. I would pay good money just to enjoy the vibe if HEB brought her back for a few sessions.