Client Service March 1, 2024

Fiduciary Responsibility: 3(38) Services Set to Increase

Plan sponsors are gravitating toward 3(38) investment managers, letting advisers take the wheel, according to a CAPTRUST senior plan adviser.

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Jean Duffy, a senior vice president at CAPTRUST, shared in a Wednesday webinar that an increasing number of clients are choosing a 3(38) investment manager and handing them “the keys of the car,” instead of staying with a 3(21) designated adviser.

As Duffy noted, in a 3(21) investment adviser relationship, the adviser makes investment recommendations to a plan’s retirement committee. The plan sponsor or the committee then makes the final decision on the investments and owns the liability for that decision.

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With a 3(38), per the Employee Retirement Income Security Act, the investment adviser takes responsibility, Duffy said, for the final decision on the investments and owning the liability.

“This really represents the highest level of investment liability transfer possible under ERISA,” she said. “I like to explain this to my committees: A plan sponsor is basically turning the keys of the car over to, me and I’m driving. I’m deciding which turns we’re making, where we’re stopping, when we’re going.”

The 3(38) option is growing in popularity in part due to the growth of 401(k) plan litigation and an increased focus on being protected from fiduciary risk. But, Duffy noted, the plan sponsor committee still has the responsibility to monitor its service provider to ensure it is doing a good job.

“It doesn’t mean that they have to second-guess the investment decisions,” Duffy said.
“They just have to be responsible for making sure that we’ve done what we’ve said we’re going to do by serving as that 3(38) investment manager.”

Duffy agreed that the shifting of the fiduciary responsibility is the most notable advantage for clients in using a 3(38) investment manager, given recent lawsuits, litigation and heightened scrutiny from the legislative side.

“Many plan sponsors are looking for ways to protect themselves, and the 3(38) investment manager is one way that they can do that, especially if they’re not comfortable making those investment decisions,” she said.

The CAPTRUST webinar also covered other topics on fiduciary roles and responsibilities in retirement plans.

Data & Research February 29, 2024

Prime Capital Announces Scholarship Fund Encouraging Women to Work in Finance

The program aims to support diversity in the financial services industry.

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Prime Capital Investment Advisors LLC announced Wednesday the Future of Finance Scholarship Fund, supporting academic scholarships for young women interested in pursuing careers in finance.

The scholarships, already awarded to their first two recipients, are designed to encourage young women to consider a career in financial services, says Terra McBride, Prime Capital’s chief marketing officer. McBride highlights the importance of starting with education in the quest to create a more diverse talent pool from which the industry can draw, with the scholarships available to current high school and college students.

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“We started talking about the pool of people who are out there,” McBride says. “We certainly want the most talented people working for our firm, and we do believe that recruiting talent and diversity are not mutually exclusive endeavors.”

The lack of female representation in financial advisement continues, according to the Carson Group’s “2023 State of Women in Wealth Management Report.” Released in November 2023, the report stated that the financial services industry has not made significant progress in gender diversity since the CFP Board first started tracking data a decade ago. Women made up 23.7% of CFP professionals in 2023, just barely up from 23.3% in 2020, according to the CFP Board website.

To encourage women to enter financial services, the Future of Finance Scholarship currently provides $5,000 for the academic year. Beyond the scholarship, recipients may also receive additional support from Prime Capital in the future.

“We’ve talked about including the people who are scholarship recipients as candidates for the Prime Capital internship program,” says McBride. “This will provide the young women with mentorship and real-world experience within the financial advisory field.”

Addressing the eligibility criteria, McBride says there is a focus on academic excellence, but emphasizes the importance of dedication to community service and a commitment to expanding financial literacy. The scholarship, available nationwide, has an application deadline for May 31 and requires essay, recommendation letters, high school transcript, and other materials.

The initial recipients for the 2023 to 2024 academic year included “two fantastic recipients that we’re really excited to see what they do in the near future with all of their learnings.” McBride says they are still working out how many recipients there will be for the coming school year.

When asked about the timing of the program’s launch, McBride acknowledged the industry’s overdue need for increased diversity.

“We really recognize that we’re kind of behind in terms of increasing diversity as an industry,” she says. “We wanted to get this going as fast as possible, because we want to start addressing this immediately.”

Looking ahead, McBride says the long-term vision includes expanding the scholarship to people of color, especially women of color. The scholarship application is currently open for the 2024 to 2025 academic year, with outreach efforts including announcements at industry events and targeted outreach to colleges and universities.

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