How to Show Your Worth

Art by Antonio Uve

Retirement plan sponsors now send out more requests for proposals (RFPs) to advisers than ever before—and some advisers have become disenchanted with the process. It rarely leads to new business, they say. Still, other advisers maintain they have found ways to navigate the RFP process, ensuring they are more likely to make the final cut in an adviser search.

The trend is definitely more plan sponsors requesting an RFP as opposed to bringing in two to three groups for review or hiring you straight up,” says Brian Hanna, executive vice president and a partner with Everhart Advisors in Dublin, Ohio. “Plan sponsors have been well-educated regarding how, as fiduciaries to the plan, they should be conducting a prudent process to hire service providers, as prescribed by ERISA [Employee Retirement Income Security Act]. They have become more sensitive to the increased changes in regulations, such as participant fee disclosures.”

Besides this, Hanna continues, “there are more retirement plan players soliciting their business to conduct the RFP for them, including retirement plan consultants, third-party administrators [TPAs], accountants and ERISA attorneys. Some companies’ only service is conducting RFPs, and software companies have built technology platforms for the process.”

Josh Itzoe, partner and chief strategy officer at Greenspring Advisors in Towson, Maryland, says he, too, is seeing more RFPs from sponsors than at any point in his career, even from those with plan assets under $30 million. “We just bid on a $5 million plan that had a very good RFP process—even better than a $20 million RFP we just responded to,” Itzoe says, noting that a TPA conducted the RFP for the smaller plan.

According to Hanna, the volume of RFPs they receive outweighs their value, particularly if they fail to result in new business. “RFPs are out of control,” he says. “Nine out of 10 are not actually an opportunity for new business but a documentation process. The better option for most plans would be to issue a request for information [RFI], which is simply a fact-gathering exercise that sponsors can conduct to have some documentation of a prudent process,” he says.

Itzoe agrees. “Sometimes plan sponsors are very happy with their incumbent and have no intention of moving to a new adviser. It’s more about just taking the temperature of the market. That’s fine, but if that’s the case, I don’t want to go through the heavy lift.”

MHK Retirement Partners, in Madison, Wisconsin, tries to meet with at least one member of a sponsor’s plan committee before deciding how to handle the RFP, says Daniel Helf, a retirement plan consultant and a partner in the firm. “When we get an RFP, we’ll say to the sponsor, ‘Can we get together for a meeting?’ If the sponsor says, yes, then we’ll spend more time on the RFP. If the sponsor doesn’t want to meet with us, it’s probably just doing the RFP for documentation. We’ll respond but only with our preformatted responses.”

When sponsors are willing to meet, Helf has an interactive conversation with them about big-picture issues such as their plan’s current status on retirement outcomes and how MHK can help. “It’s about taking the plan to the next level,” he says, adding, “If we spend an hour talking with a sponsor, it’s usually pretty apparent if it’s going to be a fit or not.”

Due Diligence

That does not mean Everhart Advisors shuns all RFPs. Hanna says it makes sense to respond to them when someone at his practice knows someone at the sponsor’s company or at the sponsor’s other vendors. He says it is particularly helpful if they know a decisionmaker at the prospect.

Robert Massa, managing director of retirement at Qualified Plan Advisors in Houston, says it is important to gather as much information about the plan as possible in order to do an effective and successful job of responding to requests for proposals. “I’ll ask the plan sponsor for the summary plan description [SPD] and plan document,” Massa says. “Sometimes they’ll even provide you with existing vendor service contracts. If I get these, I look to see if they are in an agreement they can’t get out of or if there’s a lock on the investments.”

After obtaining these documents and looking up the plan’s Form 5500 and any plan audits by the Department of Labor (DOL), Massa compiles a list of questions to send to the prospective client. “The questions could be about its plan, its demographics and its expectations of its adviser,” he says. “The questions are different for every single RFP.”

Likewise, Itzoe does his research to find out what a sponsor’s “hot button issues are. Some plan sponsors are forthright. If they aren’t, I explain that it’s in their best interest to provide as much information as possible.”

Itzoe invests a great deal of time at the prospective client’s office. “I will visit their office for a day-and-a-half to meet with all the key stakeholders and decisionmakers to make sure we’re educating them about the best practices we can bring to the table and see if they’re interested in that,” he says.

In Itzoe’s experience, the most valuable piece of information a prospective adviser can find out about a sponsor is who its current adviser is, which he finds on the Form 5500. “That gives you a sense of who you’re competing with and tells you what their compensation is,” he says.

“We do a tremendous amount of work prior to filling out the RFP to find out what a company’s particular needs are,” Itzoe says.

John Ludwig, founder and financial adviser at LHD Retirement in Indianapolis, suggests advisers also gather information from social media sites, such as LinkedIn, and the company’s own website.

For his part, Massa arranges for a one-to-two-hour interview with the retirement plan committee, human resources (HR) leader and payroll department. “We’ll talk about all of the challenges they’re facing and what they are trying to achieve,” he says.

Actually filling out the RFP takes 10 to 60 hours, he says, “depending on how complicated it is and how deep the sponsor wants to go.”

Itzoe advises following the sponsor’s cue in how it has set up the RFP. “Treat its questions like a standard SAT [Scholastic Achievement Test],” he says. “Answer them exactly as they were asked. Be honest and forthright, and don’t use the questions in the RFP as an opportunity to insert your marketing spin, but as a chance to demonstrate your due diligence.”

Blaine Aikin, founder and principal of Fiduciary Insights LLC in Pittsburgh, recently held a roundtable with affiliate Fi360 on sponsors’ interest in fiduciary services from advisers. Aikin says many of the advisers who spoke on the panel noted that sponsors include questions about 3(21) and 3(38) fiduciary services in RFPs and that advisers should be prepared to offer these services.

As far as the length of RFPs, in Itzoe’s experience, if an RFP is constructed appropriately, it will be between 50 and 100 pages.

Besides responding to plan sponsor RFPs, Everhart continues to seek new business through its strong relationships with ERISA attorneys, accounting firms and health benefit consultancies, Hanna says. “They understand the value we bring to our clients.”

On top of this, Everhart solicits referrals from existing clients and conducts webinars to educate sponsors.

The bottom line, Hanna says, is advisers should be prudent about which RFPs they respond to. If the sponsor is forthcoming, it is probably a real business opportunity. For those advisers just starting their practice and building their book of business, they should not be too discriminating, he says.