ERISA \u00a73(38) investment managers has been a hot topic in the marketing of retirement plan providers and for the most part, it\u2019s a good thing because plan sponsors who have no time to handle the fiduciary process of their plan can have someone else do it for them.<\/p>\n
The problem is that there is no requirements to be an ERISA \u00a7(3)(38) advisor as long as the advisor is a registered investment advisor, bank, or trust. So someone without any retirement plans on the books can simply prop a sign on their lawn and proclaim themselves as one.<\/p>\n
In addition, there are \u00a73(38) advisors that you have to question their independence. That could be the popular investment manager who ha become the McDonalds of 3(38)s by providing that service for 5 basis points, but being promoted by a third party administrator. Where is the independence?<\/p>\n
I even just hear about an ERISA \u00a73(38) investment manager who will charge nothing as long as the plan invests a portion of their assets in the managed accounts they offer. Where is the independence? Isn\u2019t this no-fee service (but charging a back end fee) what we have all tried to avoid since fee disclosure was implemented.<\/p>\n
A plan sponsors needs to know that \u00a73(38) should stand for something more than a number. They need to hire an investment manager that is competent and independent.<\/p>\n
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