PLANADVISER - March/April 2018 - 45

ment management, she says, pointing to Morgan Stanley's
recent efforts to centralize small-plan 3(38) services. Having
that work centralized reduces the risk for the plan sponsor
client, she says, because the many individual advisory practices
are not left to their own devices to fulfill the fiduciary
responsibilities.
Some advisers who want to offer 3(38) services will not
have the resources within their practice or an affiliation
that provides them with those resources. They may turn
to a third-party outsourcing provider. " I think where there
is the most potential is the segment of advisers we call
'dabblers,' who typically have a handful of plans as clients, "
Sclafani says. " There, we could see a growing interest in
outsourcing the 3(38) fiduciary relationship to a 'shadow
fiduciary' outsourcing provider. The outsourced fiduciary
service then allows the advisers to be more efficient and
scale their business. "
Centralizing Small-Market Work
Some members of Morgan Stanley's specialist plan adviser
group have been serving as a 3(38) adviser to midsize and
large plans for years, Cowan says. " Specialists are allowed
to take discretion for investments on their own, with oversight
from the home office, and we have allowed them to do
that for some time, " she says.
In 2017, Morgan Stanley, partnering with Ascensus,
introduced ClearFit, a 3(38) discretionary manager targeting
plans with $10 million or less in assets. It has centralized
the investment selection and monitoring work, rather than
each advisory practice taking on those tasks.
Morgan Stanley's Graystone Consulting group does the
investment legwork for ClearFit. " We have a home-office
team dedicated to manager selection and oversight, " says
Jeff McConnell, chief investment officer (CIO) at Graystone
in New York City. " We put the CITs [collective investment
trusts] together at the home office, and the investment fees
are typically lower than if a single smaller plan sponsor
went into the market by itself. We're also looking at how
the investments fit together: We design a glide path for the
target-date funds [TDFs], for example. "
Advisers still have an investment-related role, McConnell
says. " The advisers don't have to do the work of the quarterly
investment reviews themselves-we have the horsepower
at the home office to do that work for them, " he says.
" But they can talk through the results with the sponsor. "
ClearFit also frees advisers up to spend more time
working with small-plan sponsors on plan features and
participant education, Cowan says. " It really allows the
advisers to refocus with their clients on actionable items
that drive better participant outcomes, such as participation
rates, deferral rates and financial wellness, " she adds.
LPL Financial also has centralized 3(38) investment
management for the small-plan market. With its Small
Market Solution service, started in 2016, LPL Research
takes on the investment responsibilities. " We are finding
the most traction with plans under $5 million in assets, "
planadviser.com march-april 2018 | 45
http://www.planadviser.com
PLANADVISER - March/April 2018

Table of Contents for the Digital Edition of PLANADVISER - March/April 2018
