Introducing a 'Frugal' 3(38) Advisory Service

Small-plan clients can now receive fiduciary investment advice at a “frugal price,” says Frugal Financial Retirement Plan Services.

Small defined contribution (DC) plan clients of Employee Fiduciary have a new option when they want investment help. The company now offers a 3(38) investment advisory service through its new subsidiary, Frugal Financial Retirement Plan Services LLC.

According to company’s president, Eric Droblyen, Frugal Financial is a logical extension of the custody, recordkeeping and third-party administration (TPA) services Employee Fiduciary already offers. He says the company’s 401(k), 403(b) and tax-exempt government plan clients may also receive help with investment policy statement (IPS) preparation; selection, monitoring and benchmarking of plan investments; qualified default investment alternative (QDIA) selection; preparation of investment-related notices required under the Employee Retirement Income Security Act (ERISA); and ERISA 404(c) compliance. 

Included in the 3(38) offering is a fiduciary checklist to assess the satisfaction of fiduciary responsibilities. “What we’re trying to do is have a soup-to-nuts outsourced 401(k) service,” Droblyen tells PLANSPONSOR.

Adding the Frugal Financial service costs 0.10% of assets annually, subject to a $1,000 minimum. According to the firm, a client with a $1 million 401(k) plan could pay less than 0.50% of plan assets (50 basis points bps) a year in combined costs for recordkeeping, custody, third-party administration, fiduciary investment advice and investment expenses. 

Limiting the choice of funds to a suite of Vanguard investment options lends to the frugality, Droblyen explains. “Quarterly monitoring and the IPS will be the same. That’s low-cost for us and highly compliant from an ERISA perspective.”

He points to a BrightScope scatter chart, showing total retirement plan advisory service expenses. “That 50 basis points compares well with plans in the millions of dollars,” he says.

Still, he says, “The service is not for everybody.” The staff of 100 employee registered investment advisers (RIAs) only serves plans, for instance. One-on-one advice must be arranged through contacting a local adviser; a directory is provided on the company’s website.

“We get a lot of plan sponsors that come to us directly, and a lot that don’t have an adviser and don’t know where to start looking for one,” he says. They either want to reduce their costs or are unsure of their fiduciary responsibilities. “We come at this from an ERISA technical perspective,” he says. “We’re ERISA-compliant specialists.”

 Further information about Frugal Fiduciary can be found here.