Having the right tools and people makes all the difference in the world. Unions know this. When considering periodic due diligence for your organization’s benefit plan(s), a request for proposal (RFP) can be a valuable addition to the toolbox.
As a fiduciary, it can be in your best interest to issue an RFP for investment services periodically to help confirm your organization’s benefit plan(s), and ultimately your members, are receiving the service they deserve.
Issuing an RFP simplifies and formalizes the selection process and enables you to focus on the areas of most importance to your organization. The responses will help identify the right provider for what your organization needs. In this article, we share seven key steps for an effective RFP process and provide sample questions.
Seven Steps to Creating an Effective RFP
Step One: Create an RFP Committee comprised of three to five individuals to complete the next step; choose members who understand the specific needs and goals and who represent various stakeholders.
Step Two: Identify potential investment management providers by screening local providers, searching online, using personal references, and so on. Your entire RFP Committee should have a voice in selecting providers to help avoid conflicts of interest among service providers, staff and committee members. Limit the number of service providers to keep the search manageable; five is often a good number.
Step Three: Determine an RFP timeline with clear milestones and due dates. Choose when the committee wants to convert and work backward to allot enough time for the providers to respond and for the committee to digest the proposals to make the best decision.
Step Four: Develop the RFP (there are some sample questions you may want to include in your RFP beginning on page 2). It is best that the committee brainstorms and determines questions that will elicit a response focused on the specific needs/focus of your search. Now is the time to gather the information that is most important for the union to make its decision. It is recommended that you determine your evaluating criteria prior to issuing the RFP.
Step Five: Review the proposals. Each member of your RFP Committee and leadership team should review the responses prior to meeting as a team. Each person should prepare notes, opinions and list anything that was a differentiator. Together, you should compare the responses to your predetermined evaluation criteria.
Step Six: Narrow down the candidates. Your RFP Committee should conduct interviews to confirm the best provider among your top two or three candidates. Choose an interview question that the committee agrees would be helpful in a tie-breaker situation.
Step Seven: Make a selection. The RFP Committee confirms the terms of engagement, outlines the transition process, and notifies the selected provider as well as those that were not selected. Share specific feedback to each provider about what was well received and perhaps what was not perceived as a positive. The Union then enters into a contract with the selected provider.
Conclusion
Issuing an RFP can be a time-consuming process, but it is an important tool to help fiduciaries complete periodic due diligence. Used correctly, an RFP can help to make sure that an organization’s benefit plan(s), and ultimately its members, are receiving the investment services they deserve.
For more information, please reach out to your PNC representative.
Guide to Issuing: Sample Questions[1]
Section A. Company Background
- Provide a brief overview of your company, highlighting its experience in providing the services included in this proposal.
- What fiduciary responsibilities will your firm have in providing the scope of services outlined in this proposal?
- Please describe any potential conflicts of interest your firm may have in the management of this account.
- In addition to investment services, what other services does your company provide to pension plans?
Section B. Pension Experience/Service Team
- Please provide a description of the service team, geographic location, biography of each member and outline responsibilities. If other resources are available to service our relationship, please describe those as well.
- What is the average number of client relationships our assigned advisor would handle?
- Describe your firm’s client service model. Provide an explanation of how your firm measures success.
- Describe your firm’s compensation arrangement for professional staff.
- What services can you offer to our Investment Committee that support education, communication and a common understanding for decision-making?
- How would you assist our Investment Committee in meeting its fiduciary responsibilities?
- What would be involved in the transition of our relationship to your firm?
- Will your representative(s) meet with our Investment Committee at our location? How frequently? What will be reviewed at these meetings? What quarterly information can the committee expect to receive and review?
Section C. Investment Management Services
- Describe your firm’s discretionary investment management philosophy.
- Would you characterize your strategy as active, passive or combination strategies? Please explain.
- What is your process for implementing your philosophy with our investment objectives to establish a portfolio and review and monitor it in the future?
- Describe your process for selecting and combining investment managers to meet a client’s investment objectives.
- Based on initial review of our IPS, what thoughts and recommendations can you provide?
- In the process of developing the IPS, what variables would your firm consider essential to developing long-range strategies for our Investment Committee?
Section D. Asset Liability Investing Capabilities
- Describe the experience your firm has with identifying and recommending pension de-risking.
- Please provide a summarized strategy that you would recommend for our current investments/portfolio.
- Do you perform asset liability studies? If so, please describe your process for completing the study. How frequently is this performed?
