Innovest White Paper offers tips for Crafting Effective Requests for Proposals
Jordan Rice, CFP® | Manager
The recordkeeping request for proposal (RFP) process consumes valuable monetary and staff resources; therefore, it is essential that plan sponsors define clear goals at the beginning of the process. In a White Paper titled Rocket Fueled Plans: “Clear and Definite Results When Conducting a Provider RFP” Innovest Vice President, Troy Jensen, QKA, APA and Manager Jordan Rice, CFP© identify key practices for crafting effective RFP’s. Specific topics include establishing clear and definite goals, taking a thoughtful approach to questions, evaluating enhancement offerings, pricing comparison and customer service offerings.
Establish Clear and Definite Goals
Ask yourself, “Why are we conducting this request for proposal process?” Is it because we are required to by the plan document? Are we concerned about fees? Are participants unhappy with services? Also, ask “What would be the best outcome of this process?” By taking a bottom-up approach, you’ll be better positioned to conduct a successful RFP.
Design specific RFP questions
To combat that lack of clarity that is typical of RFPs, we highly recommend intentional framing each question so that it is sufficiently clear whether the recordkeeper provides a certain service. As one example, a plan sponsor exploring recordkeepers’ capabilities regarding student loans might think to pose a question like this: “Please describe your Student Loan services.” Unfortunately, this often elicits wide-ranging responses that may require further effort just to reasonably understand each provider’s actual services. Consider, instead, a series of questions like this: “Do you offer student loan refinancing? (Yes/No); Do you offer student loan consolidation options? (Yes/ No); Do you offer student loan education articles? (Yes/No)”. While the number of questions may increase, the resultant responses will carry objective answers that are ‘clear and definite responses’ to match the ‘clear and definite goals’ we established above.
Look for enhancements that will aid participants and plan sponsors
When evaluating recordkeepers, make sure that the enhancements they offer will match your needs. Improvements might include upgraded technology, like payroll and contribution efficiency or the plan sponsor and participant websites. It could be enhanced recordkeeping pricing or the fees for ancillary services like loans, qualified domestic relations orders, etc. Or it could be to strengthen the customer service experience.
Evaluate Prices and Fees
Enhanced pricing is almost always one of the ‘clear and definite goals’ set forth by plan sponsors, and rightfully so. No one should pay more for a service than is reasonable and ensuring that reasonableness is one of the key obligations for plan fiduciaries. However, depending upon the complexity and overall relationship between the plan sponsor and the incumbent recordkeeper, this can become as convoluted as other parts of the RFP. We caution plan sponsors not to let pricing be the only consideration and remind them that they are not obligated to select the lowest price. Value often supersedes cost as a more relevant metric. That being said, a fair and thorough analysis of pricing of fees should be an important part of every RFP. Special consideration should be given to conflicts of interest, ancillary fees and inclusions. For further discussion about pricing and examples, read Innvoest’s full White Paper.
Customer Service Offerings
Customer service is a key component of recordkeeping services, so it is imperative that customer service is considered during the RFP process. One way to evaluate which customer service approach is best for your plan is to directly interact with each respondent’s service team. This is often done at finalist presentations. Rather than allow this to be a sales presentation, we use it as an opportunity to interview the team in the room. Another way to address this would be through Service Level Agreements (SLA’s). Our SLA’s are generally crafted with sets of three primary components: a Service, a Measurable Standard, and a Penalty. Each compliments the other in a direct, measurable way. From a practical standpoint, the best way to devise these components is to develop a chart with the Services and let each recordkeeper develop their own corresponding Measurable Standard and Penalty. The idea is not to set standards that cannot be met nor to generate a stream of revenue from them, but rather to holds the recordkeeper accountable for their promised delivery.
Every retirement plan has its own challenges, but the through-line remains that within every RFP process there is something to gain. With careful and thoughtful planning, a request for proposal will yield favorable outcomes for the plan sponsor and participants.
In the last three years, Innovest has conducted nearly 100 RFP’s, as well as related price-checking exercises called Requests for Information (RFI’s). We have, on average, lowered the recordkeeping fees for these clients by approximately 20%. For more information about Innovest, visit our website.
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