What is the difference between a 3(21) and a 3(38) investment adviser?
Last updated October 2, 2026
A 3(21) adviser is a co-fiduciary who recommends investments while the committee retains decision authority and responsibility. A 3(38) investment manager takes written discretion to select and replace investments, shifting that responsibility to the manager — the committee then monitors the manager.
Both adviser models make the adviser an ERISA fiduciary; the difference is who decides.
- 3(21) co-fiduciary adviser: provides recommendations the committee votes on. The committee shares fiduciary responsibility for every fund decision — with expert input strengthening its prudence.
- 3(38) investment manager: accepts discretion in writing and makes the fund decisions itself. The committee's investment responsibility narrows to prudently selecting and monitoring the manager.
Which fits depends on the committee's appetite: 3(21) preserves control; 3(38) transfers workload and decision-level liability at typically higher cost. Either way, the engagement terms, fiduciary acknowledgement, and fees belong in writing — and the arrangement itself belongs in the annual oversight review.
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