By Arianna Amplo, Co-Founder, Inhub
There is a big debate over whether a plan sponsor should benchmark their plan advisor or do a formal RFP. The answer is that there is a time and place for both.
When you benchmark a plan, you are getting an idea of fees and service vs the market – this is hugely valuable and should be done regularly. Many plans have this done once a year by the Advisor (hint: be sure it also covers the advisors fees, to show the full picture).
But this is why you still need to do a formal Request for Proposal to the market even if you are seemingly happy with your advisor. You don’t truly know the quality of those services being included in the benchmark report. We suggest that every five years every plan should conduct a formal RFP starting with the Retirement plan advisor, and then follow with a record keeper RFP run by the winning Advisor.
The DOL suggests you ‘go to market’ periodically. According to the Department of Labor’s website:
“The duty to act prudently is one of a fiduciary’s central responsibilities under ERISA. Prudence focuses on the process for making fiduciary decisions. Therefore, it is wise to document decisions and the basis for those decisions. For instance, in hiring any plan service provider, a fiduciary may want to survey a number of potential providers, asking for the same information and providing the same requirements. By doing so, a fiduciary can document the process and make a meaningful comparison and selection.”
All participant education services are not created equal, nor are all quarterly meetings. Just like all benchmark reports are not created equal. Ten salons might offer haircuts, but do they all offer great haircuts for all people? Quality of service comes through in an RFP more than in a benchmark report. Although many advisors have clients long term, very few are a perfect fit for each other forever.
Conducting an advisor RFP is an educational experience, it may make you appreciate your current Advisor even more, or realize you need to kick it up a notch. Either way, it’s a business decision, not a personal one. Your current advisor should never take this personally. In fact, some of them even encourage their clients to go through this process. Good luck. And if you need a little help – go to 401kTV’s Advisor RFP section.
