How Technology Has Transformed the RFP Process

For many plan sponsors, conducting a request for proposals to find a new recordkeeper or adviser can be a daunting task—from both time-consuming and administrative burden standpoints.

But with the proliferation of new technology tools and providers, the RFP process can be streamlined and become much less painful for plan sponsors.

V Chandrasekaran, director and co-founder of Congruent Solutions, a pension administration software provider, said the retirement plan industry is experiencing a “remarkable transformation due to rapid technological advancements,” and embracing these trends will empower plan administrators and recordkeepers to optimize services.

“Automation and digital tools can help reduce administrative costs, save time and energy, streamline processes, improve accuracy, and maximize operational efficiencies,” Chandrasekaran said in an emailed statement. “Furthermore, with the advancements in data analytics and [artificial intelligence]-driven operations, businesses can gain deeper insight into industry needs and monitor their plan’s performance more effectively.”

Embrace Technology, With a Grain of Salt

At the same time, Jim Scheinberg, managing partner at North Pier Search Consulting, says it is important for plan sponsors to remember that “technology is a tool, and not necessarily an outcome.”

At North Pier Search Consulting, where the firm runs hundreds of RFPs and searches for recordkeepers, advisers and OCIOs, Scheinberg says the firm is well-equipped to use various technology platforms because the firm is already “heavily armed” with research about various recordkeepers and advisers, and it is able to interpret the data these platforms produce.

For plan sponsors looking to take advantage of new tech tools coming on the market, Scheinberg says they need to be careful about falling into marketing traps.

“If you put an electronic RFP tool in the hands of an organization that doesn’t know how to interpret the information that’s coming out the other side, you could end up succumbing to market spin,” Scheinberg says. “The tool itself is much better than doing it by hand on spreadsheets, and [having] piles of written proposals sitting on desks can be heavily inefficient. But this is a case where replacing wisdom and experience with technology probably, more often than not, is going to lead to a nonoptimal outcome.”

Conducting a Diligent RFP Process

Scheinberg says plans of all sizes receive dozens of calls every month trying to get them to change providers. This constant marketing can “shake a plan sponsor’s confidence” in its current team of providers. According to Scheinberg, this emphasizes the importance of conducting a diligent RFP process.

“The RFP can be the great equalizer in that equation,” Scheinberg says.

He recommends that plan sponsors create a regimented process by deciding, for example, to go to market every five years for recordkeeping services and every seven years for adviser services. This internal policy addresses three issues:

“The regulators see a process that’s thought-out; the litigators have a well-documented evidence trail,  so you can show you had procedural prudence; and you can push back at some of the vultures at the gate that are constantly trying to get your attention, and [you can] say, ‘Hey, we’re running an RFP routinely, and our next one up is in 2025. We’re happy to send it to you if you want to reply to it,’” Scheinberg explains. “It creates more of a regimented process instead of a reactive process.”

Plan sponsors have a regulatory duty to oversee their service providers, and Scheinberg says this responsibility was heightened by the passage of 408(b)(2) regulations by the Department of Labor in 2012. Under the law, covered service providers must provide plan fiduciaries with appropriate disclosures about services being performed and their costs.

In Scheinberg says lawyers typically say an RFP should be conducted every three to five years, and the majority of plaintiffs in ERISA litigation cases allege that RFPs should have been conducted when fees were being contemplated. But others have a more pragmatic view and say that the three-to-five-year window is too restrictive for medium and smaller-sized organizations that do not have the resources to conduct an RFP so frequently.

Scheinberg says the larger the organization, the more frequently an RFP is necessary.

New Technology Providers Enter the Market

In order to speed up the RFP process for plan sponsors, several technology platforms have entered the market, offering a variety of features that include side-by-side recordkeeping fee comparisons and pre-written templates with industry questions.

InHub LLC, an RFP and due diligence questionnaire software platform acquired by RFPIO last year, allows plan sponsors to digitize their RFPs, create a template with industry-standard questions, add their own questions or build an RFP completely from scratch.

“[InHub] allows issuers to seamlessly distribute requests and questionnaires to select candidates, more easily collaborate across teams, and centralize data gathering and review processes,” said Ariana Amplo, founder of InHub and vice president of services at RFPIO, in an emailed statement. “Our solution also offers tools to score, note take, vote on and evaluate requests.”

Amplo argued that without platforms like InHub, issuers can struggle to keep documents and communications organized, to stay up to date with changing contacts and to meet RFP deadlines.

“If the process is unorganized or candidates believe it is not a ‘serious’ RFP, they will frequently decline participation, won’t know which questions to ask or how to even begin,” Amplo said. “Poor admin[istration] and poor evaluation can not only delay an important project but can actually change the outcome.”

Amplo added that high-value RFPs that involve several department heads and internal stakeholders, such as those related to 401(k)s, can be even more challenging to keep organized.

InHub requires a one-time technology fee for plan sponsor users, with additional packages available for organizations that require more assistance or access to additional tools and services.

“I think that giving plan sponsors and investment committees a tool that helps them run just one critical RFP can save them hundreds of thousands of dollars,” Amplo said. “It helps them get to and through the RFP process in an organized, timely manner instead of putting it off another quarter, which so easily turns into another year. It can also deliver savings in the form of better pricing, fewer legal fees and bad outcomes in a DOL audit by helping them hire a qualified winner that can better guide them in the next phase of the retirement plan.”

Founded in 2018, Benetic Inc. is another RFP and request for information platform that works directly with plan advisers to benchmark plan services and fees, as well as search for new providers based on the services that their plan sponsors need.

The platform currently has live pricing for 21 recordkeepers and does custom pricing requests for another 25 recordkeepers. This provides advisers access to instant and real-time price comparisons.

“The adviser goes [on Benetic] and says, ‘These are the five recordkeepers I want to compare, and here are the requirements I’m looking for,’” explains Kristin McCarthy, senior vice president of product and client experience at Benetic. “Our platform takes all the pertinent information [from the recordkeepers] and does an apples-to-apples comparison. We put it into a nice, little, neat package that is easy to understand and explain to the plan sponsor.”

Advisers can also get quotes from recordkeepers that are not within the system, but those require a longer turnaround. Recordkeepers that decide to participate in Benetic’s platform are able to determine how they want to display their pricing, according to CEO Ray Conley.

McCarthy says Benetic’s basic services are offered at no cost to the plan adviser, but there are add-ons, such as requesting an in-depth historical benchmark, that will come at a cost.

“These technologies are just making it easier to find what you need to narrow your search very quickly,” McCarthy says. “It allows the advisers more time to meet with the plan participants and the plan sponsors and help educate them, as opposed to doing all the technical back work.”

Streamlined RFP Benefits Everyone Involved

Scheinberg says technology tools are helpful if a plan sponsor wants to conduct the RFP process solo, but it’s “only going to get them so far.” He recommends working with a dedicated search consultant, like North Pier, to alleviate much of the administrative burden.

RFPs also create work for the respondent organizations, and Scheinberg says recordkeepers and advisers are less likely to respond to an RFP if they are required to craft new answers for each request.

“Having a streamlined, electronic RFP tool can create some synergies on the respondent side, as well as on the operator’s side, whether that be the plan sponsor or search consultant,” Scheinberg says.

Amplo believes a diligent RFP process greatly benefits plan participants as well.

“I think when you zoom out and look at how this helps plan participants indirectly, it’s enormous,” Amplo said. “It helps their employers run a competitive bid process to ensure a qualified adviser with market-competitive fees is working with them to oversee the plan, investments, recordkeeper and participant education programs.  Without that, participant balances could be down significantly come retirement due to lack of education on contribution recommendations or in poor performance.”