Best Foot Forward

For PLANADVISER’s Round-table this issue, Alex Ortolani, editor of PLANADVISER, digital, talked with Eric Dyson, executive director of RFP 401k Advisor in Plano, Texas, and Greg Middleton, senior director, marketing, CAPTRUST in Raleigh, North Carolina, about best practices that retirement plan advisers can use to enhance the appeal of their responses to requests for proposals.

Many plan sponsors have increased the use of RFPs, or sometimes the somewhat lighter requests for information, to assess and benchmark their plan advisers, according to industry veterans Dyson and Middleton. Here, the two experts discuss how advisers can put their best foot forward to retain current clients and attract new ones. 

PLANADVISER: As the retirement plan adviser industry has grown, have the number of RFPs from plan sponsors also grown with it?

Greg Middleton: I’ve spent nearly 23 years in the industry, all with CAPTRUST, and my focus throughout that time has primarily been on marketing and organic, growth-focused efforts. As it relates specifically to RFPs, I was the first person [in the firm] to respond to them. We did our first bunch in 2002, and our number of total RFPs that year was six. We are scheduled this year to do over 600.

We now have a team of 12 people that [work on RFPs] … and they respond to RFPs from entities with plan assets of
$3 million or less, all the way up to $20 billion or more. The plans are also of every shape and size. It’s nonprofits, it’s public companies, it’s hospital systems, it’s education groups. … We see every type of flavor of RFP on a weekly basis.

I thought, in our first year, doing six was a lot. Now, we might be doing six a day or six a week. It’s fascinating seeing this trend that has evolved very rapidly over the past five to eight years, and we’re just excited that we can help our [CAPTRUST] advisers be successful with that.

PA: How do advisers distinguish themselves when responding to a plan sponsor RFP?

Middleton: I would say 80% to 75% of it is a push. … There are many categories where you are either going to be on par or you are not. Responses that are worthy of consideration are separated out quickly. The last 15% to 20% of the RFP is where you really differentiate yourself.

Hopefully this RFP, or the opportunity, is not cold. Hopefully you’ve had a relationship with this group, and you understand what the catalyst is behind the search, and you understand what their specific pain point is. Hopefully you’re structuring those responses and that content to specifically address their issues.

Then, it all comes down to fit. The more you can articulate or demonstrate what it’s going to be like to work with you as an adviser, or with your firm, I think that is going to get you closer to the finals presentation, and hopefully it’s going to get you through to a positive outcome.

The other aspect that will differentiate you is—if you were in that three to five group of finalists and you’ve been narrowed down to the one or two—then you demonstrate other experience or other case studies or other [similar] clients where you’ve been able to demonstrate positive outcomes. Not only does the client want to know how they will fit with you, but they want to know that you specifically understand their needs. 

Eric Dyson: I use almost the same numbers. I’ll tell a client, “Hey, 80% of this is table stakes. But we still have to ask the questions, right? Do you have any litigation? Do you have any disclosures?” 

I also tell them that my biggest value is helping them figure out a cultural fit. I’ll help the plan sponsor find the right type of adviser by personality that they’re looking for, because it’s very difficult to put that on paper. 

There are also some table stakes worth discussing. I always say [to an adviser]: There’s one committee member who will look for every typographical error and will point out to all the other committee members where the typographical errors are. A lot of times, it’s just a matter of bandwidth [that causes the errors]. The advisers have got other things going on … so things like typos will get in. Or the cardinal sin is when [an adviser] has used a template and forgotten to replace the name of the last plan sponsor—that will almost automatically disqualify them.

Plan sponsors also can smell if all you did was take your template and fill in the name and put a cover letter on it and a conclusion. If it is not personalized to the specific needs of the plan, they can sense it.

And the last thing I’d say is that readability is huge. What will discount you or get you out is if you write a tome as to why your investment policy statement is great and the best. You have to make it easy for these committee members to understand. Remember, you have a committee member who’s really, really smart about how trucking operations work. Or really, really smart about their consulting business in biotechnology, or whatever it is. But when they read these RFPs, if it is too long, I hate to say it, but they’re not going to read the whole thing.

PA: Are there any trending areas that plan sponsors are looking for in an advisory today?

Dyson: I’ll point to three things that plan sponsors value.  The first is whether you can make a difference in my employee outcomes. That is probably part of the RFP question set. 

But the next one is can you save me time? We talk about fiduciary responsibilities. We talk about investment management. We talk about fees. We talk about all these things. But they are looking for an adviser who can solve issues that inevitably come up with file transfers and recordkeeping and investing and things that are a pain for them. So being able to deliver a message that “I can save you time” is important.

Finally, human nature is such that, when we get to complicated decisions in life, our stress level goes up and we don’t like making those decisions. If the RFP response is complicated, then the plan sponsor won’t like making those decisions. 

[Some people will say] “Don’t you want to show [the plan sponsors] that this is really complicated and they need you?” My response is, “You’ve almost got it.” What I want [the sponsor] to understand is that it’s complicated, and I can make it simple for them. I think that’s what the adviser RFP response can say: … We can take this very complex ERISA [Employee Retirement Income Security Act] issue, and we can make it simple for you.

PA: What is your advice on fee structure, and what’s expected in the market right now? 

Middleton: Ultimately the fees are either going be an asset-based fee or a flat fee that’s got an escalator attached to it. But really, the more important aspect is what are the services that the plan sponsor is getting—or what does it think it’s getting? 

For example, financial wellness and advice is probably the hottest topic in the industry right now. … Some folks think they’re getting it. In reality, maybe all they’re getting is [financial] education. When [plan sponsors] are looking at the value of what they’re getting for the expense they’re paying, they need to make sure they’re doing an apples-to-apples comparison. Depending on whatever the scope of services is or whatever they think they’re getting, it’s really important that [the adviser provides it] in as much detail as possible.

Some advisers present their fees in an à la carte method. Others will do it as an inclusive fee. Or they’ll specifically state that, well, if you’re looking for adding this service, then we’ll have to readdress that fee at a later time. The size of the company is also important. Fees at a certain size of a plan will be at a certain level. Though, from our experience, once the [plan] assets reach a certain size, the fees kind of plateau.

Dyson: I’ve got one real quick thing. … When I do adviser RFPs, the advisers can bid or the recordkeeper can bid on an asset-based fee. But I require the adviser to provide a flat-fee quote.

“When I do adviser RFPs, the advisers can bid or the recordkeeper can bid on an asset-based fee. But I require the adviser to provide a flat-fee quote.” —Dyson

PA: How important is it to show a track record of success with other plan sponsors? What about for someone just starting out?

Middleton: I think there are many different ways you can define success. Or better yet, there’s a way to present success. And the way you present that is through the type of relationship a plan sponsor can have with you. 

For instance, what are the three or four things you’ll be able to help them navigate through to have a successful retirement plan offering to help their participants potentially achieve a dignified retirement? Those are the bigger questions that we’d want to focus attention toward.

Now, if it is an absolutely cold RFP, and you don’t have a relationship with the sponsor, it doesn’t really matter. If you don’t feel like you have the references, then that’s probably not the best use of your time. [Clients] that you can develop, that you have relationships with, or clients where you’ve got centers of influence or contacts that can speak on your character and on your ability to be a good advocate for sponsors, those are probably the better opportunities to pursue. 

[It’s also good] to focus on things that are local. There are RFPs all over the country. But focus on your backyard. You’d be amazed at how many opportunities are right there, and, as your practice evolves, then some of those other opportunities will come up. 

If you’re part of a larger organization, you do benefit from having the reference list of a firm that’s got 4,000 institutional clients. Not everybody is like that.

“… what are the three or four things you’ll be able to help them navigate through to have a successful retirement plan offering to help their participants potentially achieve a dignified retirement?” —Middleton

But people can still have extremely successful outcomes with RFP engagement and have tremendous practices that they develop.

Dyson: I’ve seen case studies make the difference in winning or losing. But I want to elaborate that the case study has to be very specific. If the adviser says, “We have a plan similar to yours where we did an education campaign, and we increased enrollment by 10%,” that’s not what I’m talking about.

The adviser needs to say something more like “We work with a manufacturing firm with three different state locations—in Iowa, Illinois and Nebraska—and their population is about 1,700 people.” The more specific the example is, the more it becomes real to the plan sponsor, and that makes a huge difference.

Also, every adviser firm needs to come up with an answer that’s different from everybody else’s. … If you write an answer and anybody else can say it, then that is not the right answer. If you say, “Our difference is our people, our passion and our process,” that’s something that every other firm can say, as well—so that’s no good.

I’ll give a very specific example of a local boutique shop here. Several of the advisers came from recordkeepers, and they said, “We are different because we came from recordkeepers. That’s where most of your administrative problems are, and we understand that better than anyone else.” That would be difficult for most adviser firms to say they are like that, [so it made them stand out].

So I give that example. But your answer has to be as different as you can possibly make it.

Middleton: I would just add that advisers cannot be RFP-curious; they have to be disciplined, not only for how they engage [with RFPs] but how they respond to them as well. [An RFP] is the price of admission to get to the finals now.

If advisers aren’t committed to spending the time it takes to fully vet, understand, plan and respond to an RFP, it’s not going to pass. … RFP engagement shouldn’t be based on hope. It’s something advisers need to be very disciplined about and to be very focused on.

Eric Dyson is the executive director of his own company, RFP 401k Advisor in Plano, Texas. He provides consulting services in conducting ERISA adviser searches and RFPs for plan sponsors and will provide expert witness services; he will serve as an ERISA plan committee member. He has 28 years experience in financial services, the majority of which have been as an ERISA adviser. He has served as an ERISA 3(21) adviser and an ERISA 3(38) adviser aiding clients on defined contribution plans and defined benefit plans, ERISA or non-ERISA.

Greg Middleton is senior director, marketing, adviser group at CAPTRUST in Raleigh, North Carolina. He is responsible for the department’s marketing operations; sales enablement and business development support function; conference and event support; and overall program and initiative execution. In his two decades at CAPTRUST, he has held multiple roles within the adviser support group and marketing teams focused on a broad array of financial adviser growth, service and practice management needs, in addition to developing, supporting and enhancing the CAPTRUST brand.