Outscale the Competition

It has become more common for plans with upward of $20 million in assets to go through a formal RFP process to find a new adviser, says Joshua Itzoe, partner and managing director at Greenspring Advisors in Towson, Maryland. “The difference over the past couple of years is that it used to only be plans with $50 million and up in assets that did RFPs,” he says. “Now we find that smaller plans are starting to use that process, as well. A much higher percentage of our new business comes through a formal RFP process now.”

Pre-Response Research

In its effort to “grow smart,” MHK Retirement Partners, in Middleton, Wisconsin, stresses talking with a sponsor upfront before issuing an RFP response, says Daniel Helf, partner and retirement plan consultant with the firm.

“We’re not spending much time filling out RFPs unless we feel like it’s a rock-solid opportunity,” he says. “In our opinion, at least three-quarters of the time sponsors know where they’re going before they send out the RFP. They just need the other RFP responses to put in their search documentation to demonstrate they did it. They have no interest in moving, or, if they’re moving, they already know where.”

MHK tries to meet with at least one member of a sponsor’s plan committee before deciding how to handle the RFP, Helf says. “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 will 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 pre-formatted 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.”

Ninety percent of the questions on an adviser RFP may be boilerplate and needing just a standard response, but the 10% that require custom answers are crucial, Itzoe says. “It’s the 10% difference that, if we can get more information from the plan sponsor, we can tailor our answers to its needs,” he says. “So before we do our response, we try to have a phone call with the sponsor, to dive a bit deeper.”

In that pre-response call, Itzoe wants to learn more about the sponsor’s “pain points” and issues with the plan, its current high priorities such as fees, its relationship with the plan’s vendor including the possibility it will want to change recordkeepers, and what prompted this search for a new adviser. “It’s Sales 101: We try to figure out what’s most important to that potential client, so we can give it our best ‘fastball,’” he says.

Sometimes, an RFP’s questions may fail to cover all that the adviser recipient thinks it should cover. “Here’s what’s curious to me,” says Michael Kane, managing director of Plan Sponsor Consultants, a large advisory firm in Alpharetta, Georgia. “Even in big plans, the RFPs usually have a lot of questions about investment advisory services for the plan, rather than questions about being a retirement plan consultant. A retirement plan consultant is looking at the really broad picture—not just investments but fulfilling a sponsor’s broader fiduciary responsibilities.” Kane’s firm does substantial work on areas such as vendor searches, fee benchmarking, plan design, fiduciary assessments and participant outcomes.

But an RFP might not ask about all of those areas. “So we call to talk and say, ‘We’re a retirement plan consulting outfit, and we think the questions are too narrow, because the RFP is looking for just an investment adviser. We think you ought to open it up more,’” Kane says. “But sometimes they don’t want to do that. And in those cases, the message is: If you really want to get it, answer the RFP the way they want it.”

Today, larger companies with an internal department to make purchasing decisions will more frequently do a procurement-oriented RFP when searching for an adviser, says Robert Massa, Houston-based retirement practice leader at Qualified Plan Advisors. “Large companies are becoming more machine-like in this process, and I get it, but those are some of the hardest RFPs to respond to,” he says. “They are often standardized, and they are designed to elicit some kind of score.”

For such RFPs, try calling the procurement department to gently suggest expanding the topics covered, plus to gain insight into how to maximize your response, Massa says. “You’re trying to figure out what they’re really looking for, and how they’ll score the responses,” he says. “You want to get a sense of the weighting of the questions and where you should spend more time. You want to figure out, ‘What’s going to get us scored at a 10 instead of a 5?’”

Before responding to an RFP, it also helps to read background information on the company and its plan. “When we get an RFP, we search social media such as LinkedIn,” Ludwig says. “We look at the employer’s website, and we look at the Form 5500 and any DOL plan audits. Before we start our response, we try to gather as much data as we can about the employer and its work force, in an effort to customize solutions that may benefit participants and the sponsor.”

Also, ask for a copy of the benefits guide the company provides its employees, Massa suggests. “It gives you some information about the employer’s culture, and it can tell you how the 401(k) plan fits into the culture.”

Writing the Response

A couple of years ago, Greenspring Advisors streamlined its process for preparing RFP responses, by investing in dedicated software. “It used to take me 20 to 50 hours to do a response,” Itzoe says. “I used to go through old RFPs and find similar answers to the boilerplate questions on the current RFP.”

Then the advisory firm bought RFPIO, a web-based software platform, to manage the RFP process. “Ninety percent of RFP questions are the same. The software gives me a library of all of our answers to previous questions and will order the display of the responses based on how similar they are to the questions I’m trying to answer now,” he says. “Typically, I get an RFP done in two to five hours now.”

The Retirement Advisor Council has published adviser-search documents on its website, which include an RFP template as well as a template for scoring responses. The documents show the type of key questions becoming standard in adviser searches. These include, for example: “How long have you been providing services in the corporate retirement plan industry?” “What measurement processes and techniques do you use to monitor asset allocations and riskiness of investments?” And “How do you provide assistance with employee enrollment, investment education and ongoing plan communication materials?”

As to the actual plotting out of answers, advisers offered these tips on how to write an effective response:

Differentiate your practice. Asked what in its RFP responses most often advances Plan Sponsor Consultants into the finalist round, Kane says discussing how the firm uses 12 scoring criteria to produce clients’ quarterly investment reports. Sponsors also see its Centre for Fiduciary Excellence (CEFEX) investment adviser certification as a differentiator, he says. And mentioning the firm’s industry awards helps, too, because “that establishes your credibility,” he says.

As noted, many RFPs contain mostly boilerplate questions covering the routine aspects of advisory work. However, Francis Investment Counsel LLC, in Brookfield, Wisconsin, looks for opportunities to explain its value proposition compared with advisory peers’. “How do we get to the finals? It’s when we get a chance to clearly articulate the focus of our firm,” says Joseph Topp, a Francis principal. “One thing that differentiates us in our marketplace is that qualified plan consulting is all we do—we do no other institutional consulting, and we don’t offer wealth management services.
“The other component of our business we stress is that we expend a great deal of resources on participant education, and it is fee-for-service,” Topp says. “So there’s no threat to the sponsor of us trying to garner retail relationships or capture rollover dollars from participants.”

Speak their language. Respond in a way that demonstrates understanding of that employer’s industry and that industry’s work force dynamics. “We’re in Houston, and there are many energy companies here, so I learned ‘energy speak,’” Massa says. He knows enough about the nuances of that business to be able to distinguish the challenges of an employer in energy services from one that does offshore drilling, for instance. “You need to understand this stuff and be able to speak to that world,” he says. “Figuring out what they do as a business—and speaking their language—really can help you. That’s key.”

Show how you will achieve success. If you say you can perform a service, you should be able to illustrate how you can perform it for the potential client, Massa says. “If the plan has low participation, you may say, ‘Here’s what we’re going to do’ [and list a few places to start]. Show them goals for their plan and how you’ll get there. It’s easy to say, ‘Yes, we can do this.’ It’s harder to say how you’re going to do it.”

Discuss comparable experience. Sponsors doing a search want to know the extent of an adviser’s experience with similar types of companies, Itzoe says. So he uses his firm’s Salesforce CRM [customer relationship management] software to pull statistics on work Greenspring has done with plans similar to a current prospect.

“What’s even more compelling is using case studies of work we’ve done with similar clients, whether that’s [based on] the industry or the plan size,” he says. “If a sponsor has low participation, we can say, ‘Here’s an example of a similar plan where we implemented automatic enrollment and automatic escalation, and here’s the data on the increase in participant deferrals in that plan after three years.’”

Find ways to make an impact virtually. Responses once were done on paper, but sponsors increasingly handle the RFP process online. According to Ludwig, the tightly formatted response forms make it harder to personalize an advisory firm’s submission. “It’s becoming more electronic, and, as advisers, we’ve got to figure out little ways to garner more attention with our responses,” he notes.

“We’re looking at having video clips of members of our team that we would send with the RFP,” he continues. “We need creative ideas to help us get to the finalist stage—and that’s where you have a greater chance to show them your passion and your value.”

RFP Timing

How long does the RFP process take? “Depending on how long the questionnaire is, we normally spend anywhere from 20 to 40 hours on our response,” says Francis Investment Counsel’s Joseph Topp.

That time includes a conversation with the sponsor to learn, for example, how it decided to include Francis in its search, and about its plan’s demographics and challenges. The advisory firm’s business-development team also tries to garner insights from background information it requests —anything from the plan’s investment policy statement (IPS) to its health-metrics reporting.

If Francis becomes a finalist, it generally spends a couple of weeks creating a customized presentation. The team prepares the structure and outline of what it wants to present; if it intends to recommend plan changes, it will confer with Francis’ in-house investment consultants, research analysts and/or education specialists.

“Then we script it, and we meet to practice our presentation,” Topp says. “We also spend time trying to anticipate questions we might get from the plan sponsor.”

Topp says the timing on the potential client’s end during the RFP process varies, depending on the particular sponsor’s sophistication level and infrastructure, the scope of the questionnaire and the number of advisory firms being considered.

“For a sophisticated sponsor, it may take two to six weeks to evaluate the RFP responses and call people in for finalist presentations,” he says. “Then it may take them a couple of weeks to make their selection and notify candidates of where they stand.”

Art by Hye Jin Chung