Increased regulation in the employer-sponsored retirement plan industry has made benchmarking retirement plan services and fees against industry norms and practices the standard. And soon they will use the same process for finding financial advisors, according to CAPTRUST Financial Advisors.
For many years, plan sponsors have used a formal request for proposal process to identify prospective recordkeepers, third-party administrators and investment managers or to benchmark and validate incumbent providers.
Now they are turning to the RFP process when hiring retirement plan advisors or benchmarking an existing advisor’s services and fees.
CAPTRUST believes the advisor RFP will soon become the preferred method for conducting an advisor search or documenting that an existing advisor is qualified to meet an individual plan’s specific needs.
The company believes there are four main reasons plan sponsors would engage in an advisor RFP process.
- Plan changes over time. Retirement plans grow and change over time as a result of acquisitions, divestitures, downsizing, hiring and investment returns, said CAPTRUST. Many plan sponsors engage advisors to determine if existing plan features and services are up-to-date and appropriate for the plan’s participant base.
- Increased fiduciary burden. It has become harder to comply with ERISA guidelines and Department of Labor regulations. Many plan sponsors are not equipped to cope with these increasing responsibilities and they seek to share fiduciary liability with a retirement plan advisory firm.
- Market intelligence. Advisor RFPs can provide a robust evaluation of a plan’s incumbent advisor and can be used to verify that fees and services charged are competitive, identify any missing capabilities and provide written documentation of the advisor selection or benchmarking process.
- Formality of process. It isn’t enough to have a long-term relationship with an advisor. DOL investigators want to know how and why you selected certain advisors. A formal RFP process can provide helpful insights to plan sponsors by allowing them to gather intelligence on the current state of the art for retirement plan advisory services, pricing for those services and the different business models of advisors providing them.
CAPTRUST Financial Advisors is an independent investment research and fee-based advisory firm that provides retirement plan and investment advisory services to retirement plan fiduciaries, executives and high-net-worth individuals. It is headquartered in Raleigh, N.C.