Broker Check

Fiduciary Services

ERISA 3(21) Fiduciary Advisor and 3(38) Investment Manager

Our Group is among a limited number of LPL Financial advisors approved to engage as both an ERISA 3(21) fiduciary advisor and a 3(38) investment manager. These fiduciary statutes require that the advisor's interests must always be aligned with the interests of the plan and its participants.

What is a 3(21) Fiduciary Advisor?

Any individual can be a fiduciary under section 3(21) if they exercises any authority or control over the management of the plan or the management or disposition of its assets; if he/she renders investment advice for a fee; if he/she has any discretionary responsibility in the administration of the plan, or is named in the plan documents. 

When a plan sponsor adopts the advisor’s recommendations, the plan sponsor retains all of the fiduciary responsibility and liability of the decisions.

What is a 3(38) Investment Manager?

Section 3(38) defines an Investment Manager as a fiduciary due to their responsibility to manage the plans assets. ERISA provides that a plan sponsor can delegate the significant responsibility (and significant liability) of selecting, monitoring and replacing of investments to the 3(38) investment manager fiduciary.

A 3(38) fiduciary can only be (a) a bank, (b) an insurance company, or (c) a registered investment adviser (RIA) subject to the Investment Advisers Act of 1940.  The plan sponsor signs over authority to the 3(38) fiduciary to make all investment decision; the 3(38) fiduciary assumes legal responsibility and liability for the decisions it makes.

Both 3(21) and 3(38) advisers accept fiduciary responsibility and adhere to ERISA 404(a)’s duty to serve solely in the interest of plan participants, and both have to meet the “prudent man” standard of care. Plan sponsors retain the responsibility to select and monitor the adviser, regardless of their adviser’s fiduciary status.