Investment Consultant
Bridgebay Financial, Inc.
Selecting a service provider for a 401(k), 403(b),
or 457 retirement plan is one of the most crucial decisions that an employer
and plan fiduciary can make in determining the retirement outcomes for its
employees.
The Department of Labor (DOL) has indicated that a
plan sponsor has a fiduciary duty to establish and follow a formal review
process at reasonable intervals, generally 3-5 years, to ensure the caliber of
the selected provider. A client service focused organization will tailor its
services to the plan sponsor's needs and have an understanding of the key
requirements of the plan sponsor.
The process starts with the Request For Proposal
(RFP) which should address the provider’s services, expertise, client commitment
and compliance experience at a reasonable cost.
The RFP provides a strong foundation for selection but is not the only
factor. The in-person finalist
presentations should highlight the relationship services.
Provider Selection Sub-Committee
It is good practice, in order to facilitate the
service provider search, for the plan sponsor to establish a Selection
Committee with a range of members with different areas of expertise such as
payroll, employee benefits, legal, compliance, investments/finance and
technology/systems. Each member should
be responsible for evaluating the provider’s abilities in their respective key
areas.
Use of an Outside Retirement Plan Expert
Many plan sponsors engage an outside consultant to
guide and advise them through a methodical process that is well-documented and
clearly illustrates the reasons for the decisions made. The consultant's role is to guide the plan
sponsor in establishing goals and objectives, success metrics, and targeting
performance standards. The plan consultant can screen candidates, customize the
RFP to the plan sponsors needs, conduct the provider search, analyze or score
the results and lead the finalists’ presentations.
The RFP consultant will pre-screen candidates based
on specific plan sponsor requirements or a set of minimal capabilities. A retirement plan consultant may expedite the
selection process by searching its database of service providers to identify
those candidates that offer services that best fit the particular plan's needs.
The consultant can guide plan sponsors through a
large universe of competent service providers and qualify a few candidates that
are a strong match for the plan sponsor and the participants. Service providers have different target
markets, service levels and areas of expertise.
The RFP consultant can differentiate among providers and permit the plan
sponsor to select the service provider that best meets their specific
requirements.
Preparation of the RFP questions is critical for
efficiency and thoroughness to prevent receiving vague responses. Certain questions may serve as
differentiators. The consultant's
expertise in understanding the nuances of different levels of service,
identifying potential conflicts of interest and understanding the benefits or
limitations of certain providers can be extremely valuable to a plan
sponsor. A key benefit in using an
expert is that the consultant can provide invaluable insights from having
worked directly with the numerous providers under consideration.
One of the best ways for a consultant to present
the results of their evaluations is to provide side-by-side analysis and a
scoring system to enable the plan sponsor to identify and understand the
finalists they would want to interview.
