The Evolving Use of RFPs
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Effectively filling out a plan sponsor’s request for proposals has become table stakes for plan advisers in recent years, as sponsors increasingly rely on these documents to select finalists to interview.
“In terms of winning new business, 10 years ago it was 15% to 20% through RFPs,” says Chris Donnelly, head of the national RFP team in his role as chief advisory services officer at SageView Advisory Group in Newport Beach, California. “Now it’s close to 60% from RFPs, and I think that trend’s going to continue in the future, as more plan sponsors want that record of due diligence on whom they hired and why they hired them.”
Sources say, in the past few months, the volume of RFPs has increased substantially, as organizations that have put off the process during the pandemic begin to ramp back up.
“In addition to new RFPs, we have companies revisiting the responses we sent two years ago and asking us about those,” says Donnelly, whose firm’s institutional clients have an average size of about $100 million in plan assets.
As the RFP process has become a more integral component of growing an adviser’s business, plan sponsors also are requiring more work from advisers who want to stand out and make it to the finals. That trend has accelerated as consolidation has been reducing the number of providers and increasing the competition among those that remain.
Evaluating Opportunities
As RFPs become more common, a challenge for advisers has been separating a true opportunity for business from the plan sponsor that is simply sending out RFPs to benchmark its existing adviser.
“Being able to qualify opportunities early on is important,” says Greg Middleton, a senior director with CAPTRUST in Raleigh, North Carolina. “Because, otherwise, no matter how much time and energy you put into the RFP, you’re not going to move the needle, and it’s just going to become a distraction.”
To qualify leads, Middleton says, it is important to connect with the plan sponsor and learn more about its needs. This can also help lead to a better RFP response.
“[A prospect’s] needs aren’t always flushed out in the RFP document, so communicating with [the organization] upfront by phone or email helps us get better information to customize our response,” Donnelly says. “If it’s not open to a conversation about why it’s doing the project and what it’s looking for, then we have to ask whether this is a real opportunity.”
Such conversations can also help the firm build a relationship with a prospect—especially prospects in the private sector—which can improve the adviser’s odds of making the finals, Donnelly says. That is because it can be difficult for advisers to differentiate themselves on paper, particularly when competing with five other firms also good at creating RFP responses.
Even with the “tire kickers,” who are just benchmarking, the adviser can gain from addressing the RFP, says Bret Almstedt, vice president wealth RPS [retirement plan services] service manager at Johnson Financial Group in Grafton, Wisconsin. The firm works with institutional clients having retirement plans in the $2 million to $50 million range, though it does not spend significant time customizing answers for such clients.
“We believe we have a very powerful offering to showcase, so we tend to keep a pretty robust set of responses for those stock RFPs,” Almstedt adds. “We know our capabilities, and we know our platform, so having some of that in reserve makes it easier to respond to those opportunities when they arise.”
New Areas of Focus
To continue to craft stand-out RFP responses, advisers say they must continue to improve upon their process. At SageView, that has translated to a shift in focus from retirement readiness to financial wellness, as more plan sponsors now take a holistic approach to their benefit offerings.
In addition to traditional, core questions about fees, services, fiduciary offerings and the adviser’s ability to produce better outcomes for participants, sources say they increasingly see new questions pop up in RFPs, relating to some specific areas. One such area has been technology in general and cybersecurity in particular, Almstedt says.
Plan sponsor committees want to know about advisers’ cybersecurity processes and procedures, as well as their approach to maintaining and improving their platforms and virtual offerings, he says. Questions having to do with environmental, social and governance matters are often appearing, as well as questions on diversity, equity and inclusion—due partly to a growing awareness of inequity in retirement savings.
“Plan sponsors want to know: How do we educate participants new to retirement saving, those who haven’t previously been offered plans, those with limited knowledge of the benefits of long-term investing, those whose understanding of retirement may not yet include concepts of financial security and independence,” Almstedt says. “Fundamentally, a retirement plan is a vehicle for individuals to enhance their own equity, and our mission is to expand and include as many individuals as possible, from all walks of life, all cultures and communities, in achieving positive financial outcomes and more secure futures.”
Some advisers also see diversity, equity and inclusion as an area where they can differentiate themselves.
“Our firm is doing a lot more to branch out and participate in DEI programs, so we’re proud to be able to talk to some of those points in the RFP, even if [the prospect] isn’t bringing it up,” Donnelly says.
As to ESG, the focus can vary substantially depending on a plan sponsor’s industry and employee demographic. “At the risk of stereotyping, a solar panel producer will probably have more questions about ESG than a welder will,” Almstedt says.
Another growing area for sponsor questions, Almstedt says, is multilingual plan offerings and the ability to serve plan participants who mainly speak Spanish or some other language.
A Customized Approach
As plan sponsors rely more heavily on RFPs, they also vet the responses more thoroughly to find advisers that really understand their business and can offer true value to plan participants. This means that, for qualified leads, advisers need to differentiate their service offerings, customize their RFPs to the needs of the sponsor and illustrate how they can help the plan sponsor meet its objectives.
“Cutting and pasting responses just isn’t going to cut it anymore,” says Middleton, whose firm’s RFP business typically focuses on retirement plan prospects with plan assets of about $600 million. “Organizations are becoming much more sophisticated in the way they evaluate the RFP, so the quality of responses has to grow with that. If you’re not customizing it or doing something to elevate your value proposition, you’re not going to make it through the screening process.”
Plus, having a transparent and focused RFP can minimize future problems or miscommunications during the onboarding process if an advisory firm does win the business.
Besides reaching out directly to the plan sponsor to learn what it wants, Johnson Financial Group does its own research into the plan sponsor, looking at its Form 5500 filings and any other public records to ascertain more about the plan, Almstedt says. That includes analyzing what the adviser can glean about the plan’s unique needs and specific goals, and looking for ways to hit those targets.
“We’re trying to respond to the questions behind the questions,” Almstedt says. “So we’re tailoring our offerings, for example, to whether this is a client with one work site that wants someone to do an in-person benefits orientation or a client that’s spread over several states and relying on virtual communication and education.”
At CAPTRUST, there is a dedicated team of 11 business development and sales enablement professionals looking through the details of every RFP before submission. That teams completes 90% of a typical RFP; the adviser provides the other 10%, which is specific and unique to the opportunity.
“Plan sponsors are using the RFP to look for reasons to exclude you,” Middleton says. “It’s a screening process. So, you cannot leave in the wrong prospect’s name or exceed the page limit or email it in a minute past the deadline.”
Recognizing that plan sponsors often see the RFP process as a methodical means of collecting evidence that they performed due diligence in the hiring process is also an opportunity to give plan sponsors what they need, Almstedt says.
“Don’t just sell to the plan sponsors; help them document their decisions with meaningful responses beyond the asked questions,” he says.
While some organizations have returned to “business as usual” and expect advisers to meet them in person for final presentations, others still prefer virtual meetings. More than half of plan sponsors surveyed by John Hancock in 2020 said, because virtual meetings had proven effective, they planned to keep them in the mix going forward.
Chris Donnelly of SageView Advisory Group says quarterly meetings have slowly begun shifting back to in-person, so he hopes prospect presentations will follow suit. Still, advisers need the flexibility to present whichever way a client prefers. While there are benefits, such as travel-time and expense saving, to virtual meetings, there are drawbacks as well.
Even after two years of practice, remote finals remain more challenging than in-person presentations, says Greg Middleton of CAPTRUST, as presenters must be facile with Zoom, Microsoft Teams or whatever platform the sponsor prefers. Plus, they have to handle lag time or connectivity issues that can disrupt the presentation. “You want to be able to navigate the content, the resources and the technology and not have any technical issues,” Middleton says.
At SageView, prepping for online meetings requires significantly more practice than in-person meetings did. The firm has experienced teams that have worked together for a long time, allowing them to read each other’s body language and present cohesively as a team during in-person meetings.
“They have to practice conveying that same cohesiveness when they’re individually on a screen working from different offices,” Donnelly says. “So we have more practice sessions where folks do presentations to internal teammates in a virtual setting, so they can understand how people react on a video platform.”
Donnelly adds, “Even when all of the technology works perfectly, it is still harder to make personalized connections through a computer screen than when everyone is in the same room.”
Virtual presentations have some advantages, though, including being able to more seamlessly use multimedia, Middleton notes.
“If you’re presenting on a screen, you can transition to a pitch book, a client deliverable sample or a video,” he says. “Or you can bring in additional subject-matter experts to further convey or explain the issues that are relevant. That’s a tremendous opportunity, because with virtual presentations, that expert could be in Dallas at 9, Florida at 10 and California at 11.”
Even for clients that have shifted to in-person finals, there remains a recognition that further communication will take place online. “You have to find more ways to engage prospects via a virtual environment and create a connection online, because that’s where many opportunities ultimately are now,” Middleton says.