42 | planadviser.com may–june 2017
Christopher Venuti is senior vice president and institutional consulting director for Graystone Consulting, a business of Morgan Stanley, in Los
Angeles. His team consults on about $5.5 billion in assets,
with an average plan size of around $100 million. According
to Graystone leadership, a big part of the recent growth
and client retention success of the firm has involved delivering discretionary investment management services as a
3( 38) fiduciary.
Roughly 60% of the advisory group’s book of business is
now serviced under 3( 38) arrangements, Venuti observes,
and just about three-quarters of all new plans brought on
in recent years utilize the service. “It is a topic that’s really
important right now among our existing clients and prospects,” Venuti says.
Regulatory and litigation pressures—as well as organic
client demand—have forced most advisers serious about
having a future in the Employee Retirement Income Secu-
rity Act (ERISA)-governed retirement planning industry
to take on the somewhat less rigorous 3( 21) fiduciary role.
The 3( 21) arrangement involves requirements to offer best-
interest advice to plan sponsor clients but still leaves them
with the final decision; 3( 38) services mean the adviser is
in control, offering discretionary investment management
Against this backdrop, Venuti says, offering “the next
level of fiduciary service” as a 3( 38) investment manager
can be a natural and powerful differentiator in the eyes of
clients, who now commonly see 3( 21) advisers.
“Clients are very attracted to the notion of gaining
additional fiduciary protection however they can,” he adds,
“and the 3( 38) investment management service can offer
Sizing the 3( 38) Marketplace
The latest PLANADVISER Practice Benchmarking Survey
(PLANADVISER, November–December 2016) showed a large
increase in advisers serving as fiduciaries, of any type, to
plan sponsors and plan participants. There was a jump in
the percentage of advisers acting as a 3( 38) to plans—from
56% up to 60%—and as a 3( 21)—from 90% up to 92%.
Jonathan Blaze, head of the defined contribution invest-
Deciding whether to be a 3( 38) or a 3( 21) fiduciary