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  • Writer's pictureSam Fiduciary

What is a Fiduciary?

What is a Fiduciary?
What is a Fiduciary?

What is a Fiduciary?

If you’re the manager of your company’s retirement plans, you are responsible for making decisions about the plan with the participants’ best interests in mind. This is common knowledge among retirement plan managers but many don’t realize that as their company’s fiduciary, they can be held personally liable for losses due to a breach of financial responsibilities. So what makes one the fiduciary of their company’s retirement plan?

Fiduciary status is based on work functions and responsibilities rather than a title. That means your company’s CFO isn’t automatically the fiduciary simply because of their title if the COO or CEO makes the decisions concerning retirement benefits. You are considered your company’s fiduciary if you:

  • Have discretionary responsibility or authority in administering the plan or managing the plan’s assets

  • Render investment advice for direct or indirect compensation with respect to any money or property of the plan, or have the authority to do so.

As the fiduciary, you are responsible for creating a well-documented, efficient process for reviewing, monitoring, and updating investments that are appropriate for your company’s retirement plan. Again, if you drop the ball in your responsibility here, you could be held personally liable for losses. Many plan sponsors are unable to do this on their own because this process requires the knowledge and experience of a fiduciary professional.

ERISA and the Responsibilities of Sections 3(21) and 3(38)

ERISA stands for Employee Retirement Income Security Act. ERISA was established into law in 1974 and provides minimum standards for pension plans and health plans in private industries. Section 3(21) defines the term ‘fiduciary’ while section 3(38) details the requirements of serving as an “Investment Manager” of a qualified retirement plan. Anyone with these roles in their companies should know and understand each of these sections for your own protection as well as your company and its employees.

The Roles and Responsibilities of a 3(21) Investment Advisor

A 3(21) Investment Advisor makes recommendations for your company’s retirement plan but doesn’t actually have discretion over plan investments. 3(21) Investment Advisors are ideal for companies who wish to maintain discretion and control over plan investments. These advisors can choose investment funds to make available for employees but it's up to you to approve the fund lineup and make recommended changes over time.

3(21) Investment Advisors can also serve as co-fiduciary of your company’s investment plans. In this arrangement, the co-fiduciary adds value to the plan but is limited in making recommendations and you would still be liable for choosing, reviewing, and updating plan investment options.

What You Need to Know About a 3(38) Investment Manager

If you’re looking to fully minimize fiduciary responsibility within your company, hiring a 3(38) Investment Manager is your best option. You can delegate full authority and discretion to a 3(38) Investment Manager to make decisions about the fund lineup. With this option, you are only liable for prudently choosing and monitoring the Investment Manager as well as benchmarking their fees. This is your best option if you want to minimize your personal liability should a loss occur.

How Do I Choose Between a 3(21) Investment Advisor and a 3(38) Investment Manager?

Both a 3(21) Investment Advisor and 3(38) Investment Manager provide essential understanding and experience with the process of selecting, monitoring, and updating investment plans. The best way to decide this answer is to determine if you want a service that makes recommendations and helps you make decisions but leaves the liability and ultimate decision-making to you, or if you want one that takes on all of these responsibilities for you.

Once you’ve decided which type of advisor you need, do your due diligence in researching and reviewing qualified professionals before making your selection. The last thing you want is to choose an advisor or manager who is inexperienced or has a conflict of interest in acting in your retirement plan beneficiaries’ best interests.

As a highly experienced independent fiduciary, I take my legal responsibility to act in my client's best interests to heart. Your company’s employees and their futures are important to me because you’re not just another client, you are an employer of hard-working people who deserve a happy and peaceful retirement. I don’t hesitate to take on the role of fiduciary because I know that I am constantly and consistently looking out for the best interests of all of my clients concerning their retirement plans. As an independent fiduciary, I am not bound by any conflicts of interest that could impact my client's best interests.


If you are responsible for managing your company’s retirement plan and are concerned about your current investment options, I can help. My specialty is reviewing and adding 99% value to all of my clients’ retirement plans. Contact me today If you’re ready to get the most value from your company’s retirement plan and protect yourself from personal liability as your company’s fiduciary.



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