Inhub recently completed an advisor RFP for a mid-sized Arizona 401(k) plan sponsor providing valuable insights and lessons for companies thinking of going through this process. Though 401(k) and 403(b) plan sponsors regularly benchmark and conduct RFPs for other service providers like record keepers and money managers, very few conduct the same process for their plan advisor though the same legal and logical principles apply. Why?
Plan sponsors routinely rely on their advisor to conduct benchmarking and RFPs for other service providers but there’s an inherent conflict asking the advisor to benchmark themselves and evaluate competitors. Using an objective third party like Inhub is key not only to leverage technology but also to have some to guide them through the process. (401kTV makes Inhub’s services available to registered users leveraging advisors who have attained their Certified 401(k) Professional (C(k)P) designation.)
The most difficult part of the process for the Arizona plan sponsor was informing advisors not selected and making sure that the capabilities of the various advisors actually met the needs of the plan. Advice to other: “less is more” and be specific supplying as much information as possible including plan documents. Advice to advisors: focus on the needs of the plan, not their core competencies, asking lots of questions upfront not afraid to go off script.
The good news for plan sponsors is that once you find a competent and compatible plan advisor, everything else gets easier like finding the right doctor. It’s important to benchmark that advisor annually and go to RFP every three to five years, just as with other DC service providers. And, if there’s a major change at the company requiring different skill sets or if the company and plan has grown significantly, then the advisor RFP process should be considered. If your advisor is resisting going through this process, it should raise serious red flags. It’s very difficult to hide during an RFP process conducted by an objective third party.
