All About the Advisor RFP Process
Choosing a new investment advisor for your plan can be a cumbersome, complex task, and due diligence is required - you don’t want to just pick the first advisor you come across. But what should the process look like and how can you spend the least amount of time on the task while still getting the maximum impact?
Company A vs. Company B
We’ve encountered two extremes in the past eighth months when it comes to advisor selection; we’ll use two hypothetical companies to illustrate the extremes. With one organization - we’ll call them Company A - I was basically starting from scratch. During a Zoom meeting with the committee, it was apparent that none of the basic information about our firm we had discussed previously by phone had been conveyed to them, and documents that I had sent prior to the meeting had not been read. The committee was entirely unfamiliar with our firm. I presented to the committee and tried to get some more details regarding what they needed, but to no avail. We parted ways. If they had chosen us as plan advisors, I distinctly got the feeling that I would have been doing a lot of fiduciary training with them. They seemed very detached from their plan and weren’t asking the questions that they should have been asking given the position they were in.
With the other organization - let’s call them Company B - we got a blind invitation to the RFP. I received an email with a short memo and a 90-item questionnaire to fill out. The memo gave generic information about the company, such as industry, plan size, etc. I asked them if the committee would be willing to answer some questions to see if indeed we would even be the right fit for them. (Like, why did they want to know if we outsourced our marketing? Was it because they needed help marketing the plan internally and wanted a firm with a marketing staff?) Long story short, they didn’t want to answer our questions, and instead asked us to fill out the questionnaire. We politely declined.
So to sum up these two extremes in a nutshell, we have a company that asks very generic questions (if any), and another that wants you to fill out a long, detailed questionnaire (with many questions requiring a short essay and several that were seemingly irrelevant). To me, it seems that both of these approaches indicate that the company doesn’t know what they’re looking for and they’re wasting time as a result. The sweet spot on an RFP is somewhere in between.
Our Plan Advisor RFP Framework
In the search for a plan advisor, you need to ask questions tailored to your organization - the problems you’re seeing, the scope of services you’re looking for etc. To help, I’ve come up with a framework for conducting a plan advisor RFP.
Know your goals - Why are you conducting this RFP to begin with? Are you surveying or looking around? Are you benchmarking your current advisor? Do you intend to replace your advisor? Do you have a project? Your goals will dictate how you conduct your RFP.
Know your key stakeholders’ criteria - It may not just be you as the HR person or CFO you need to take into consideration. You may also need to take into account the committee members, the board, or the home office. What are their criteria? What kind of a firm do they want to work with or which advisor responsibilities are most important?
Determine the most efficient process - Outsourcing the entire RFP may be the most efficient (and cost-effective) way to conduct an RFP. Going back to our two examples; Company A’s process is pretty efficient, as long as the correct questions are being asked. However, I would argue that Company B’s process is inefficient - after all, someone has to compile, read and summarize all 90 answers to those lengthy questionnaires! (The questions alone were 9 pages, which means 20+ pages to read.)
Develop your objectives and scope - What are your objectives with this entire process? What services do you need? What expectations do you have? Think of it in terms of writing a job description. Details that we here at Retirement Planology like to have include company background, what your value system is, what your culture is like, number of employees, problems with the current plan, etc. - these are details that will help us determine if we can meet your needs as a plan advisor. If you want someone to give you a proposal for solving a problem, you have to help define the problem.
Gather information on possible advisors - Are you going to ask for material written in advance, or are you going to collect documents up front and do finalist presentations later? You also need to take into account things like compliance, conflicts of interest, and fiduciary liability - these are important to know on the front end. There are documents you can request that will give you a lot of details upfront about the plan advisor, such as the Form ADV 2 for RIA firms. Brokercheck.com is also a good resource to check out for registered representatives who do not have to disclose their conflicts of interest. Getting up front information on possible plan advisors can help you narrow down the field before you even submit an RFP.
Determine your timeline - If you require plan advisors to fill out a questionnaire, be sure to give them enough time to do so. Keep everyone happy by letting them know when you’ll be determining the finalists and when you’ll make your decision. Note: there are certain times of the year when plan advisors are super busy, namely the month following the quarter end.
Remember the good rules of fiduciary practices:
Organize: gather what you’re doing and what laws/regulations apply
Formalize: layout your process framework
Implement: execute on the process, document your decisions
Monitor: revisit your decision periodically
Steps 1-6 are all about the Organization phase. Execute your process and last, document the process and your decision. You’ll need all this later when you revisit to monitor the advisor you selected.
The above framework will help you select a plan advisor that will fit your company’s needs, but as I mentioned above, outsourcing is also an option if you don’t want to handle the entire process yourself. There is also software available that can help you gather RFP responses. Whichever way you go, keep in mind that you want to ask the fewest questions with the most impact.
One really good resource that may help you in coming up with questions for your RFP is on the Retirement Advisor Council’s website, of which we’re a member. They have a bank of questions that you can use, depending on what’s most important to you. Not all the questions in the bank will be necessary or applicable to your situation, so you’ll want to weed out those that aren’t a good fit.
If you still consider yourself clueless about the advisor RFP process, know that we in the plan advisor industry are educators at heart! Any great advisor will be willing to talk with you about what you should be looking for in your search for a new plan advisor or what types of services are offered. So reach out if you need to!
Shameless plug: we’re one of those advisory firms that’s willing to discuss your needs with you - you can contact us at hello@retirementplanology.com or through our website.