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| The Request for Proposal (RFP): Quality Participant Services Start Here by Joe Masterson of Diversified Investment Advisors When searching for the perfect plan provider (vendor) to meet your needs, the RFP is a crucial part in the due diligence process. Typically it is a series of very specific questions asked by the plan sponsor (employer) about a provider's recordkeeping capabilities, communication and education programs, and investment products. When the "right" questions are asked, the RFP allows sponsors to evaluate providers on the perceived critical areas of their plan and, most importantly, their participants. So how do you ask the "right" questions to help determine the right provider for your plan? Here are some general rules of thumb: |
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| Understand Your Needs Ironically, the most important aspect of the RFP process occurs before the questions are even asked. Giving your current plan a discerning review is the first step in a provider search. Before you ask anything, you must determine what you are seeking from a new provider. Make a list of all the services your plan requires. Evaluate your current provider's investment products and services to determine if your needs are being met sufficiently and cost effectively. As an example, if your current provider's participant education program is not meeting your needs, determine which factors are making it so and develop a framework for what you'd like your new education program to accomplish. Understanding your needs and establishing clear objectives will help you generate questions that will give you answers worth reading. Only Ask What is Necessary This may sound like gratuitous advice, but even when the objective of a search seems cut and dry, plan sponsors can fall into the trap of asking unnecessary questions to prospective providers. Although some questions about a provider's background and experience cannot be avoided, a majority of the details about a company's organization, assets, representative clients, etc... can easily be attained through other sources (e.g., their website). Rather than ask questions for readily obtainable answers or information you already have, determine what you need to obtain about a provider through the RFP. For example, if one of your objectives is to consolidate your plan under a single provider, ask the incumbents to describe how they have handled these types of situations in the past. Request case studies and references. By asking for information you can't obtain elsewhere and which relate back to your overall objectives, you'll pose just the necessary questions — a strategy that uses your time and money efficiently. If You Don't Ask, They Won't Provide You With the Information You Need On the surface, this advice appears counterproductive to that given above: ask strictly necessary questions. And yet, by the same measure, the typical provider will not give unnecessary answers. If you don't request certain information from potential providers, they won't just assume you want to hear about it anyway. Be certain that your questions are specific and thorough. Phrases such as "explain the process" and "outline the procedure" can help ensure that providers fully clarify and explain their services, telling you all that you may want or need to know. In addition, such meticulous answers may give you some "free advice" on potential plan design changes and investment solutions. No One Gives a Simple "No" Response Stay away from asking questions that result in "yes" or "no" answers. The responses will most likely be answered in the affirmative and without any further explanation of any limitations or restrictions involved. These types of questions do little to help you separate the right provider from the wrong one. Roll Up Your Sleeves The best way to get to know how good a provider can be is by doing your homework. Visit their Website. Explore their online capabilities by reviewing demos of their private plan sponsor and participant Websites, as well as their voice response systems. Industry resources, such as PlanSponsor.com can also give you valuable information such as rankings, strengths and weaknesses, and investment benchmarks. The RFP Impact The RFP is a highly effective tool that a plan sponsor can utilize to gauge their service needs and requirements as well as the ability of selected vendors to meet those needs. How well you handle the RFP process will ultimately make the decision process easier. So when it is time to start your provider search, remember to ask the "right" questions. This will help you not only select the right provider, but will also have a bottom line impact to the plan and to your participants. |
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