5 Important Questions to Ask on Your Vendor RFP
1. What are the real strengths of the provider?
When I say this, I don’t just mean can they provide a quality product that is accurate and timely, or what their latest and greatest program to increase deferrals is.
Many providers segment out specific types of plans that they are targeting or are good at supporting. It is important to know if you fit into their “sweet spot,” if you are going to be growing into it over time, or if the provider just isn’t a good fit. Ask for items such as how many plans they service of your size related to their overall book of business, what are their capabilities, what do other plan sponsors say about them, and how they are structured.
An example of this would be the plan provider that offers everything but the kitchen sink in services -- to the plan that just doesn’t care about anything except providing a cheap plan.
2. How does the provider make money?
If they’re a mutual fund company, you can bet that your pricing will benefit from putting money into their funds on the platform. That may not be a concern for you, but think about how it might affect the future of the plan as it grows. If they’re a financial services company overall, consider whether partnering with them puts your participants at risk of being sold additional products. Last, will the provider support and feed their retirement plan business (which is costly and a niche) or is it possible they will eventually exit the business altogether because their other departments are more profitable? Ask whether their focus is the retirement plan market and look for additional statistics to support their answer.
3. What will it feel like to work with them?
You are totally allowed to ask to meet the people that will provide service to your plan ongoing. Don’t be shy. The salesman is paid to be nice and professional and tell you what you want to hear, er, I mean educate you on their “superior” product, but they will leave you and hand you off to the service team. Get a sense for what day-to-day interaction will be like and how your plan will be serviced.
4. What are the weaknesses of the provider?
Weaknesses aren’t necessarily a reason to throw the provider to the wayside. This just means you were savvy enough to ask for the full picture so that you know where they draw the line. For example, a provider will tell you that they do not do ESOP plans or doesn’t have brand recognition in the marketplace even though they’ve been around and won awards. Knowing this, you can plan for your participant communication strategy or evaluate whether you’re going to need something they don’t provide in the near future.
5. How are they going to help YOU?
It’s nice to hear how each vendor is really great, knowledgeable, offers the same stuff as everyone else…but what is very important is how they will help your plan reach your goals. You want them to have taken the time to outline HOW they intend to help you use what they’ve got to offer. Using a car as an example, the vast majority will get you there. The difference might be when you arrive, or if you arrive in comfort and style.
Bottom line: You want the product to work like it's advertised. You also want to get the info that helps you pick the vendor to fit your situation. These 5 questions are a great start -- ask them in a way that you can get data and verifiable feedback. References are always a good idea too, and make sure to ask open ended "questions" like, "Tell me about how they service you and what you like best/worst about your relationship." The reason for this is also so you can get a sense of how reasonable the fees are that they have quoted, and what you'll be paying for. Fees are only an issue in the absence of value!
Our last piece of advice is to embrace your inner skeptic or, if the process of handling this yourself is too much for your plate right now, ask us to be the skeptic on your behalf and run your RFP!