Yesterday’s U.S. Supreme Court ruling allowing individual 401(k) account holders to sue plan administrators may cause some angst among advisors.

At issue in the case was whether individuals (as opposed to a particular 401(k) plans’ account holders as a class) could sue plan administrators for mismanagement of their accounts. Two lower courts had previously ruled that plan participant James LaRue, the plaintiff in the case, could not do sue his plan administrator even though the plan administrator had breached its fiduciary duty. But yesterday, the U.S. Supreme Court gave LaRue (and by extension, some 50 million U.S. workers who have invested upwards of $2.7 trillion in 401(k) retirement plans) the right to do so.

Chip Roame, managing principal of Tiburon Strategic Advisors, a Tiburon, Calif.-based market research and strategy-consulting firm for financial institutions and investment managers, was surprised by the ruling and says it may scare some reps out of the 401(k) business.

“People take no discretion when they sue. They name the plan administrator, the record keeper, the mutual fund company and the advisor,” he says. Further, he adds, even if the suits have no legal standing, they can cause havoc for an advisor. “The net result could be that the 401(k) plan business will become even more institutionalized because we’ll likely see many reps exiting the business and larger firms picking up smaller plans.”

But at least one advisor disagrees. Jim Mosteller, president of Liberty Asset Management, an RIA in Willowbrook, IL says he sees the ruling as a marketing opportunity for investment advisors looking to tout their fiduciary status. “I think it will provide further reason to talk to an independent investment advisor versus a product-based salesman,” he says.

David L. Wray, president of the Profit Sharing/401(k) Council of America, says his group always stood by individuals’ rights to sue administrators that may have breached their fiduciary duty. “The Supreme Court just clarified any uncertainty that may have existed,” he says.

The lower courts based their rulings on a 1985 Supreme Court decision to reject individual lawsuits by participants in defined benefit plans. But Justice John Paul Stevens said in his opinion yesterday that the defined benefit plans of that time did not have individual accounts, and that, as a result, the law should be applied differently.