Hiring a 3(38) investment manager fiduciary to oversee the investments in a retirement plan lineup is an important step that sponsors should take seriously, experts say. They need to ensure that they are looking at the right criteria to judge and assess a potential 3(38) fiduciary.
Even if they are moving from 3(21) investment adviser fiduciary services to 3(38) services, they need to do detailed due diligence, says Gregory Metzger, senior consultant at North Pier Search Consulting.
“I would be pretty confident that most organizations moving from a 3(21) fiduciary to a 3(38) fiduciary are doing so because the adviser has suggested they make the move,” Metzger says. “They may feel comfortable with their current relationship and just make the change, but we think that is imprudent. Even if they are moving upmarket with an organization they have been comfortable with, they still need to have a process to assess various criteria, and all of this should be documented, and one of the most important things they need to consider is the fiduciary’s track record. We create a composite of 3(38) client menus going back at least five years and look at the investments they used and their returns. We also do this on a quarterly basis and compare them to their peer groups.”