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What’s New With RFPs?

Every situation is unique, of course, but experience teaches us that there are certain patterns that make sense when it comes to evaluating plan designs and plan providers. In this week’s reader poll, NAPA Net readers share their experience.

First off, nearly two-thirds (63%) of this week’s respondents said they recommended that plan sponsors conduct an RFP every three to five years, with another 32% advocating at least every five years, and the rest basically recommending “as needed.” As one reader noted, “ERISA stipulates that expenses are reasonable. Fee benchmarking through RFIs and third-party services can tell us if fees are reasonable. If they are and if the plan sponsor is happy with the services of the provider, we don't conduct needless RFPs.”

As for RFIs – well, they were less common. Half of this week’s respondents do recommend them, while the rest opted for “it depends.” As one reader noted, “If they aren't doing an RFP every 3-5, they should at least do an RFI. They are the same thing — but one has more questions and candidates. The actual ‘difference’ between an RFI and RFP is very subjective.” Another reader explained, “For fiduciaries, RFIs are much more important.”

Regarding RFI frequency, a quarter said 2-3 years, 38% said 3-5 years, and one in eight said at least every 5 years. The remaining 24% said that they didn’t generally recommend RFIs.

The vast majority – 87.5% – said they do plan benchmarking, and the rest said “it depends.” As for the focus of that benchmarking (more than one answer was permitted):

50% — Industry surveys
63% — A formal benchmarking service
67% — Comparisons to other plans
72% — More than one of the above

How Have RFPs Changed?

So, how have RFPs changed over the past 5 years? Readers offered the following observations:


  • More plan design questions

  • Volume. We receive more/more often than we did 5 years ago.

  • More often, more credible, more insightful than ever before.

  • Shortened, with more emphasis on client service

  • Much more concise.

  • Fewer really full scope RFPs, more RFIs.


Most Important Questions

Readers also provided suggestions as to what they considered to be the most important question on the RFP, including:


  • “How many clients do RMs have?”

  • “Customer service, past history with compliance issues/help for customers with compliance issues, and a standard fee grid.”

  • “The 3 most important are experience w/ plans of our size and type, services offered (related to what we receive currently) and what should we consider upgrading to, and lastly fees. Experience, Services and Fees.”

  • “A series of question that helps answer the following question: What kind of experience do you have with plan sponsors just like us?”

  • “Questions relating to responsiveness and client communication, and the expectation of same.”

  • “It depends on the client,” noted one reader. “Typically, the most important question is the one that is the one that is most meaningful to the plan sponsor. I can't think of a single question we ask that is consistently the most important question. We have clients that have issues with administration so that is the most important area to address, whereas others are concerned about the participant experience.”


Missed ‘Takes’

But what about the question(s) that is most often “missed,” either in terms of the “right” answer, or a (fully) truthful one? Here’s a sampling:


  • How many clients do RMs have?

  • Average client tenure.

  • How many lost clients in the last 3 years.

  • Not providing thoughtful feedback on the current plan.

  • Any question surrounding plan retention.

  • The toughest part is comparing apples to apples. Whereas someone’s bps fee might look competitive, if a plan typically has 300 distributions a year and if a provider is charging for distributions and another is not, that can be a significant income to provider. What do they charge for mailing notices?

  • What are the few key areas that differentiate you from competitors and how do those characteristics tie into your organization's long-term profitability/viability goals?

  • How much will the recordkeeper make on the plan? Despite all efforts at disclosure, they hide revenue very well and are incredibly creative at creating revenue.


However, one reader – who is “on the other side” (the responder) said that “sometimes the questions are not at all clear and difficult to interpret – I am sure those receive the most ‘wrong’ answers!”

Other Comments

Other comments about RFPs, RFIs, benchmarking and “the process”:


  • “Companies should understand the questions they are asking before sending out an RFP – don't just put a new name on a template document and send. I can't imagine that is very useful to anyone but it is a lot of work and would be an awful lot of information to work through once received.”

  • “Unfortunately RFPs get a bad name from groups that ‘do them just to do them’ rather than taking them seriously and doing them thoughtfully. Thankfully, this is changing. It is truly the only prudent method to evaluate and hire for fiduciaries (any vendor: advisors, recordkeepers, actuaries, custodians). There is also a delicate balance between evaluating for experience, fees and services and ‘fit — they are qualitative and quantitative.”

  • “Most RFPs that I have received are not well thought out, are too general in nature, and appear to be a ‘check-box’ approach to a serious undertaking. To quote the well know philosopher Yogi Berra... ‘if you don’t know where you’re going, you will wind up somewhere else’... too many seem to be going thru the motions, with no goal in mind.”

  • “The industry and fees have become so compressed that RFPs don't provide the value that they once did. For example, whereas there used to be dozens of providers specializing in the $20 million and up space there are realistically less than a dozen that do a decent job. Ten years ago when doing an RFP, the differences in fees were significant and now everyone is typically within 5 bps for same services (including ancillary fees such as distribution, etc.). Also, there was a significant difference in services, technology, etc. and providers are looking more alike than different.”

  • “Unfortunately, the key in all of these steps is being able to provide to plan sponsor clients very short bullet points that they can easily digest and repeat. Without those, the entire process is not that helpful.”


But this week’s Editor’s Choice goes to the reader who said, “This is very tough as no provider can answer the question which is most important to the plan sponsor, how are you going to take care of my employees.”

Thanks to everyone who participated in our weekly reader poll!

Got a question you’d like to run by the NAPA Net readership? Post it in the comments section below, or email me at [email protected].

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