Behind the Curtain of our Vendor Services Committee

As Erik Daley wrote last year, we have three committees that govern and drive our consulting activities.  These committees are Vendor Services, Technical Services, and Investments.  Last year, I wrote a blog post on the discussions that took place at an Investment Committee in November.  In this post, I review a recent Vendor Services Committee (VSC) meeting.    

Like our other committees, the VSC meets monthly.  We have an annual calendar of events that includes updates on vendor review meetings, relevant projects (e.g. fee benchmarking, service profiles, etc.) and vendor search projects.

Given the far-reaching impacts of the coronavirus pandemic, we are holding ad hoc meetings beyond our regular monthly meeting cycle.  In addition, the lines of responsibility between our three committees have blurred.  In particular, the CARES Act provisions for defined contribution plans span both the Vendor Services and Technical Services (TSC) Committees. For example, the TSC is discussing whether the provisions are mandatory or optional. At the same time, the VSC is determining how each vendor’s implementation strategy provides practical impediments to a plan sponsor’s view of the provisions as optional or mandatory as well as other flexibilities in the administration of the provisions.

Here is a brief summary of what we discussed in our April meeting:

  • CARES Act
    • The VSC shared their results from individual client discussions regarding the adoption of the CARES Act provisions for defined contribution plans. While plan sponsors remain focused on the long-term retirement security of their participants, many are deciding to offer some, if not all of, the provisions of the CARES Act.  This is particularly true if an individual participant makes a direct request noting financial hardship.
    • The vendor market remains fluid and divergent regarding implementation options of the CARES Act provisions. The two biggest issues discussed with clients were vendor selected ‘opt-in’ versus ‘opt-out’ strategies and the preferred/supported communication strategy offered by the vendor.  The VSC discussed the impact this has on plan sponsors with multiple vendors and the need for coordination to have a consistent plan level strategy. 
    • The VSC discussed whether new items were needed for upcoming second quarter meetings as part of our CARES Act coverage.   
  • Fee Benchmarking
    • The VSC discussed the impact of declining market values on:
      • Asset-based pricing models and resulting impact to pricing flexibility for vendors that are shown to be above market.
      • Per-capita pricing models that are assessed as a percentage of assets. It’s likely that protracted market decline could result in a short-fall scenario.   
    • Vendor Review
      • A recent manager review meeting, of course conducted via Zoom, was summarized for those members not able to attend. The meeting discussion highlighted how each vendor is implementing business continuity plans and how to best discuss this with our clients.
    • Vendor Search Projects
      • Updates on the three vendor search projects were provided. It appears that vendors are highly interested in the recent searches.  Due to increased market volatility, working to minimize blackout and maintaining market exposure through the transitions were noted as items to review with the vendors (on both sides of the transition). 

The meeting concluded with agreement on two new projects.  The first resulting in a creation of a sub-committee to revise the data collection effort from vendors to support the pre-qualification step of a vendor search to increase our vendor coverage.  The second item sought to refine our view of financial wellness program offerings.  The resulting content is expected to come in the form of a webinar and level 3 Fiduciary Training material. 

Multnomah Group is a registered investment adviser, registered with the Securities and Exchange Commission. Any information contained herein or on Multnomah Group’s website is provided for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Multnomah Group does not provide legal or tax advice.

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