Can your practice benefit from a 3(38) investment manager?

Can your practice benefit from a 3(38) investment manager?


There’s a lot that goes into running a retirement practice, and with so many duties and responsibilities, it seems like there’s never enough time in the day to finish everything that needs to be done. Time management can be a tricky thing for financial advisors, and advisors may spend anywhere between 10 and 17 percent of their time on client acquisition alone [1].

Having more time to spend with current and potential clients is the first step to growing your business, but you can’t just add minutes into the day, so how are you going to find the extra time that’s needed? That’s where investment managers come in. A 3(38) investment manager can help alleviate some of the duties you currently take on by providing additional oversight of the plan—freeing up more of your time to spend with current or perspective clients.

Why should a financial firm add a 3(38) investment management service?

There are a variety of reasons financial firms should consider adding 3(38) investment management services to their retirement practice. There’s a lot of risk associated with taking on fiduciary responsibility for a retirement plan, like a 401(k), for both the plan sponsor and the financial advisor of the plan. This essentially gives financial advisors two options: continue to provide fiduciary services and risk personal liability for fiduciary breaches or provide only non-fiduciary services and risk losing out on potential clients. Neither of these options seem ideal, but adding a 3(38) investment manager can help alleviate the problem.

Not only do you minimize your personal risk and liability when you add a 3(38) investment manager to the solutions your practice offers, but it also demonstrates to your clients and plan sponsors that you truly have their best interest at heart. One of the most important responsibilities plan sponsors face when offering a new 401(k) plan is the selection of investments that will be offered, and clients can shift that responsibility to a professional manager when a 3(38) is offered.

For financial advisors, that shift in responsibility also means you’ll have more time available to spend with your clients or growing your practice. You won’t have to worry about helping with investment selection or performance monitoring, giving you more time to support the savings goals of your current clients and meet with new clients to put them on the path to retirement readiness. Not to mention—the more services you offer current and perspective clients, the more loyal they’ll be to you. And that’s the whole goal after all, right?