Advisor RFPs Gaining Momentum

More than 10 years ago, the practice of conducting RFPs, which was firmly established for larger and mid-sized plans, started moving down to the small market, enabled by tools that made even the blindest of blind squirrel advisors appear farsighted. Is that evolution beginning for advisor RFPs? 

It’s now common practice for large and mid-market plans to go through an RFP process to select a plan advisor. Now that plan sponsors have an automated tool, courtesy of InHub, that practice might become the norm for even smaller plans — forcing blind squirrels to move even further down market.

InHub is the brainchild of two young, former Greystone advisors who had worked in the DC market. Their site, which launched recently, automates the RFP process for plan sponsors, matching plans with advisors that meet their specifications. Sponsors pay a fee of $2,500 (or more if they use InHub’s concierge service) to go through the entire RFP process, including creating the request. Most of the process is plug-and-play, though the sponsor can create its own specs. 

Advisors fills out a profile about their firm and then, if selected, respond to the RFP. Currently there is a pool of 40 advisory practices with at least $500 million in institutional assets and 20 plans, with another 20 firms waiting approval. Additionally, sponsors can invite any advisors they like to participate in the process. 

Committee members review the responses — usually from five to seven advisors — and then meet with about three firms in person. Winning advisors pay 25% of first-year fees to InHub, which means they need compliance approval, since InHub is a registered RIA.

The InHub system seems simple yet comprehensive, so that price does not become the overriding criterion. Most importantly to plan sponsors, it simplifies and streamlines the entire process. 

Though InHub just launched this year, some of the largest advisory practices are now participating in RFPs — not just for DC plans but also for foundations and family offices. The key to their success is attracting plans to participate. Surveying 20 of these teams (which range from $500 million to $52 billion), it’s surprising how many advisor RFPs these advisors have participated in — as well as the smallest plans that they have responded to. Two firms have responded to 100-300 RFPs in the last two years, with the median at 15 RFPs; all groups have responded to RFPs for plans at $10 million or less.

Advisors are not bringing their own clients to In Hub, but they are bringing prospects — especially if that prospect is about to select a third party that may not be friendly to the advisor to conduct the process. In Hub says that advisor RFP consultants end up winning the plan themselves half of the time. 

Bringing fee transparency to plans that carry fiduciary responsibility made sense. It’s hard to argue that the selection of an advisor, which is the most important decision a plan sponsor will make, should not be based on the merits and qualifications of that advisor.