According to research performed by the Callan Institute, 1 in 5 plan sponsors intend to conduct a recordkeeping search in 2019. So maybe you’re one of those plan sponsors that are thinking about a search this year? Maybe you see a search coming later down the road? Whatever the case may be, if you are involved in your company’s retirement plan, there’s a good chance that you’ll eventually be exploring your options for recordkeeping services.
We’ve laid out some ideas to consider and questions to ask when going through that next recordkeeping search for your retirement plan.
To start out, we’ve identified three areas of fit that we believe are essential to a successful plan sponsor – provider relationship:
- Philosophy Fit – the fit between the provider’s overall value proposition and the culture and values of the plan sponsor.
- Product Fit – the fit between the provider’s solution and the specifications of the retirement plan.
- People Fit – the personal fit between members of the provider’s team and the plan sponsor’s staff and plan participants.
When issuing a recordkeeping Request for Proposal (RFP), think about what a successful plan sponsor – provider relationship looks like. It’s important to ask the right questions in the RFP. Ask questions that will give you a sense of their philosophy, product, and people, or however you have defined a successful relationship. And don’t forget to ask the questions in a way that will make it easy to compare providers.
To help guide your recordkeeper RFP we have included some questions you may want to ask in your search, focusing on areas that are often overlooked, enabling you to easily compare providers:
Provide 2 examples of ways in which your firm made a positive impact on the retirement plans you supported over the last 2 years.
This is a great way to evaluate what they consider impactful and will help in determining if what they are doing is in line with your goals and objectives.
How many 401(k) plans have you both gained and lost over the last 2 years and what were the reasons for attracting and losing those clients?
By asking the question this way, they can’t provide you with just a net number of clients. Their response will show you the type of activity both positive and negative that they have experienced. You’ll also get an understanding of why other clients are drawn to them or what others thought was lacking in the relationship.
What major enhancements have occurred at your firm over the last 2 years and what is slated to be released over the next 2 years?
This question will help you gauge where they are at from a competitive landscape compared to their peers. You can determine if what they are working on and what they value, aligns with what you are looking for.
Provide a services grid and ask the providers to fill it out
While you want to get a feel for their philosophy and people fit, you also need to gain a clear understanding on their services and fees. We suggest providing a grid that contains all the services that you need and want. By asking the providers to complete a grid as compared to simply listing their services and fees, it will make it so much easier to compare multiple providers.
Ask the providers to check the box if they offer the service and provide them a small space to explain why, if they don’t. In another grid, outline questions regarding fees that you need to know in order to make a decision. These should include items such as the per head recordkeeping fee, if revenue sharing can be automatically returned to participants on a quarterly basis, and what are the additional fees for processing loans, hardship withdrawals, and offering self-directed brokerage accounts.
To help ensure that all provider’s fees are on a level playing field, provide key data in advance, such as: number of unique participants, current plan balance, average annual contributions, and number of expected days they are to be onsite providing employee meetings. Giving respondents the information they need to provide you with the most accurate fee quote possible, will only lead to an easier decision-making process.
A recordkeeper search is no small undertaking, but not an impossible one either. Sometimes, organizations will work with an outside partner to provide knowledge and guidance throughout the search process. An outside and objective opinion can be the best view of a retirement plan. If you look for the provider with the best, philosophy, product, and people fit for your organization, you’re on the right track in making a decision you can feel confident in.
Have questions on this process? Need an independent partner to guide you through a selection? Let’s start a conversation and discuss how we can help align your organization’s goals with a partner for your retirement plan.