In Practice March 7, 2007

Managing the RFP Process

A provider search is often one of the most time consuming parts of a client relationship.
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That was the counsel of panelists Mike Finnegan of Wachovia Securities, LLC and Craig Rosenthal, from PLANSPONSOR Pathfinder at the 401(k) SUMMIT last week.

Discovery

The basic groundwork for a provider search is laid during the discovery process, when advisers gather information about the plan, its features, and the plan sponsor’s need. This can be made much easier when advisers use forms and a series of questionnaires to ensure they gather the proper information about the client. “This is where your expertise in the industry is valuable,’ Rosenthal said.
The discovery should be properly documented, so that later in the search, if a plan sponsor asks why you are looking at a particular feature, the adviser can reference those early discovery notes, Finnegan commented. During this process, Finnegan said advisers should engage the plan sponsor to give examples of how they may have tried to address plan issues previously.

The Search

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Once an adviser is hired to do a search, it is vital that the process is handled effectively. That was the counsel of panelists Mike Finnegan of Wachovia Securities, LLC and Craig Rosenthal, from PLANSPONSOR Pathfinder at the 401(k) SUMMIT last week.
Once the discovery is over, it is time to begin the search. Finnegan suggested that before getting started on a search, every adviser should know what his “walk away” is; how much money is too little or time too much that this isn’t a profitable venture. That decision needs to be based on the size of the plan, as well as the methodology for the search and the adviser’s personal revenue needs. When originally pricing the search, Finnegan said, it is important try to leave some leeway, because inevitably things will come up and often you will be asked to do more than you anticipated.
There are many tools and instruments available to help with the RFP process, but the most important thing is that no matter what an adviser uses, the process is properly organized, Rosenthal said. Before evaluating the possible plan, advisers can review with their client the criteria that will be used in completing the search process, Finnegan said.
An adviser can draw up a contract with the plan sponsor that details a timeline that will affect for the plan sponsor and the provider. Finnegan suggested using a double barrel timeline, that has one column of when something is supposed to be completed and by who and then a second column that shows when that task actually was completed.
Sometimes searches are done just to benchmark where a plan is in relationship to others, or perhaps just to see if the fees are fair and advisers will want to be able to offer data about other plans or information about how plans like their client’s are faring in the marketplace, Finnegan said. This is often an area when advisers might want to examine the investments in the plan as well.

Committee Presentation

At the end of the process, an adviser should be able to present the plan sponsor and plan committee with an inverted pyramid that shows how the process started by examining a large group of providers and what was done to end up with those that made it to the finals or the one that was selected as the new provider, Rosenthal explained.
When presenting to the plan committee, quite frequently there will be people with whom the adviser has not worked during the search process, like the CFO or President, present, Finnegan said. They often just want to be heard, he said, so he reiterates the search criteria that was decided at the beginning of the process and ask if anything else needs to be considered before presenting the findings.
Frequently, the provider who wins the bid is not selling, Finnegan said, but is able to convince the plan sponsor they will be a help in running the plan, something that is also often true of plan sponsors selecting advisers to help with the RFP process itself.
Diversions March 7, 2007

A Stitch in Time

This weekend most of the nation will “spring forward″, thanks to an extended period of daylight saving time.
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Under The Energy Policy Act of 2005, Daylight Saving Time, or DST, this year begins on the second Sunday in March and runs through the first Sunday of November (see also Time for a Change?). But for this law, DST would not have begun until the first Sunday in April.
Daylight Saving Time (DST) was not formally adopted in the U.S. until 1918, as part of the establishment of standard time zones. DST was observed for seven months in 1918 and 1919, but after World War I ended, the law proved so unpopular (mostly because people rose earlier and went to bed earlier than today), it was repealed in 1919 with a Congressional override of President Woodrow Wilson’s veto. Daylight Saving Time – note that it is not savings time – became a local option.
“Watch’ Words
Purists will (perhaps) appreciate that clocks technically “spring’ forward from 1:59 a.m. to 3:00 a.m. on the appointed day. In the United States that was originally chosen as the changeover time because it was practical and minimized disruption. After all, most people were at home (the ones who care about sleeping, anyway) – and that also happens to be the time when the fewest trains were running (more on that in a minute). It is late enough to prevent the day you are “in’ to switching to yesterday (when time “falls back’ in the fall), and early enough that the entire continental U.S. switches by daybreak.
As disruptive as the shift can be, it used to be worse. Consider that prior to 1966, each U.S. locality could start and end Daylight Saving Time however it wanted. One year, 23 different pairs of DST start and end dates were used in Iowa alone! And, for exactly five weeks each year, Boston, New York, and Philadelphia were not on the same time as Washington D.C., Cleveland, or Baltimore – though Chicago was. There was one 35 mile long bus route that ran from Ohio to West Virginia – and during that trip, passengers who wanted to keep their timepieces current had to change them seven times!
Observe Actions
The Uniform Time Act of 1966 put an end to that chaos, though interestingly enough, it does not require that Daylight Saving Time be observed – it just requires that if DST is observed, it must be done uniformly (and, at that time it called for it to begin on the last Sunday of April and run till the last Sunday of October – that was changed in 1986 to begin DST on the first Sunday in April. That month’s extension saved the U.S. an estimated 300,000 barrels of oil each year). There are places in the U.S. or its territories where DST is not observed; Hawaii, American Samoa, Guam, Puerto Rico, the Virgin Islands, and Arizona. However, the Navajo Nation participates in the Daylight Saving Time policy, even in Arizona, due to its large size and location in three states. Indiana, which for years observed DST in only part of the state (the state’s two western corners, which fall in the Central Time Zone), passed a law in 2005 that implemented DST statewide, effective last year.
Finally, as for those trains. To keep to their published timetables, trains cannot leave a station before the scheduled time. So, when the clocks fall back one hour in October, all Amtrak trains in the U.S. that are running on time stop at 2:00 a.m. and wait one hour before resuming (overnight passengers are often surprised to find their train at a dead stop and their travel time an hour longer than expected). As for what will happen Sunday morning, those trains instantaneously become an hour behind schedule at 2:00 a.m. – but they just keep going and do their best to make up the time.
Tips for the Change
For those of you still awake, the Sleep Foundation offers the following tips on how to get a good night’s sleep this weekend:
  • In the four days before the return to Daylight Saving Time (Sunday, March 11), try to go to sleep and awaken 15 minutes earlier each day to adjust to the time change.
  • A short nap on March 11 can help make up for less sleep, but don’t nap within a few hours of your regular bedtime in order to avoid disrupting nighttime sleep.
  • On nights after the time change, go to bed at your usual clock time (e.g., 11pm). You may experience some difficulty falling asleep, because your brain has not yet adjusted.
  • Create a sleep-friendly environment that is dark, cool, comfortable and quiet.
  • Have a relaxing routine before bedtime, such as soaking in a hot bath, reading for fun or listening to soothing music.
  • Avoid caffeine, nicotine and alcohol for several hours prior to bedtime, as they can disrupt sleep.
  • Get up at your usual clock time.

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