PLANADVISER - July/August 2019 - 47

ciary. Those who want to supply 3(38) services may do it
themselves or outsource to the Pensionmark home office-
most do the latter, he says.
Advantages to outsourcing the 3(38) work are numerous.
" One, when you start to get into the complexity of being a
3(38), you go beyond your typical investment analytics, "
Hammond says. Herein is an advantage of working at an
aggregator firm such as Pensionmark, he says. " Our analysts
conduct quarterly calls with investment firms and analyze
investments both on a quantitative and qualitative basis,
which is beyond the scope of most advisers.
" This frees them up to interact with sponsors and
participants more, to do more detailed work on plan design,
recordkeeper benchmarking, financial wellness, creating
new client relationships, expanding on existing client
relationships, etc., " Hammond continues.
" Yes, some practices have
the backing and the
resources to handle this, but,
increasingly, more advisers
see the value in partnering
with a national 3(38) firm that
can specialize in that. "
" We see many
advisers embracing the 3(38) model because, when they act
as a 3(21), it's not the most effective use of everyone's time.
Plan sponsors can't add intellectual capital to the decisions
[of which investments to select]. This helps advisers to be
much more effective and to focus on the things that can add
the most value to the plan. "
Plus, when the adviser brings 3(38) services to bear,
the plan menu can be addressed with " significantly faster
execution time, " Hammond says. With a 3(21) model, retirement
plan committees typically meet only twice a year, so
a plan would have to wait until its next meeting to discuss
underperforming funds and get approval from the board to
replace them. " We can be agile, as a 3(38) fiduciary, " he says.
SageView Advisory Group LLC, headquartered in Irvine,
California, has a centralized investment committee, made
up of advisers from its satellite offices. The group has developed,
and periodically updates, a
select list of funds in each asset class
to recommend to all of SageView's
advisers, says Randy Long, CEO. " This
absolutely creates tremendous efficiencies
for advisers as well as consistent
client experience across the
board, " Long says. " It creates better
results and outcomes for clients,
which is better for the participant. "
Similar to the model at Pensionmark,
CAPTRUST has a centralized
investment management
research
team, composed of 45 analysts who
do " extreme due diligence and monitoring, "
says Steve Wilt, senior vice
president, based in Akron, Ohio. The
chief investment officer
(CIO)
from
each of CAPTRUST's acquired firms
presents
recommendations, which
this group of peers then discuss.
CAPTRUST reviews each client's
investment
goals
individually and,
acting either as a 3(21) or 3(38) fiduciary,
makes investment recommendations
specifically targeted to each client, Wilt adds.
CAPTRUST's centralized investment management and
service model, comprising " vast resources, " Wilt says, is
precisely why he joined the firm, a decade ago. This centralized
approach frees up its advisers to focus on improving
participants' retirement readiness and outcomes. It also
lets them work more closely with the participant and
sponsor than was possible before, he says.
CAPTRUST notes an increase in sponsor requests for
proposals (RFPs) asking it to price out both its 3(21) and
3(38) services, Wilt says. " Sometimes, after being with us
for six to 12 months, [sponsors] decide to turn over the
keys and move to our 3(38) services, " he says.
Thomason says advisers have been doing the math when
it comes to client demands. " When you think about the large
number of investment options out there, it starts to add up
to significant human capital, " he says. -Lee Barney
MODEL PORTFOLIOS
A recent report from Broadridge Financial Solutions Inc., " Distribution in a Model-Driven
Age, " found that a growing number of advisers are turning to model portfolios. Their
home office likes these models: They give it greater control over investment processes,
helping it boost the portfolio's performance, retain client assets and lower its own fiduciary
risk. For advisers, offloading investment management responsibility frees them up
to strengthen customer relationships and grow their business.
Broadridge says, between 2016 and 2018, the compound annual growth rate for retail
portfolios was 21% and for model portfolios it was 37%, the result being $1 trillion in
vested model portfolios and over 10,000 different models on the market.
Ninety-one percent of advisers said using a model portfolio gives them more time for
client-facing activities; 83% said it gives them more time for financial planning; and
78% said clients care more about planning, service and support than they do about
outperforming the market. Ninety-three percent of advisers who use a model portfolio
are happy with the decision, and 91% said it gives them more client-facing time.
The top five reasons advisers gave for using a model portfolio, Broadridge found, are:
business scalability, access to investment management expertise, more time to focus
on client acquisition and retention, more ability to address compliance and regulations,
and more stringent investment manager due diligence. -LB
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