As a retirement plan consultant, I have seen first-hand the significant impact that choosing the right recordkeeper can have on the success of a retirement plan. While many view recordkeeping as a commodity, the right recordkeeper can provide valuable support to plan sponsors and participants, help manage costs, and ensure compliance with regulatory requirements. However, finding the right recordkeeper can be a complex and time-consuming process. This is why it's important when you conduct a search that you do so in a manner that will most likely lead you to a positive outcome.
Whether the outcome is to retain an incumbent or to select a new provider, a comprehensive search process should include three key elements: detailed data on recordkeepers, their systems and technical capabilities, access to experts with direct experience in working with multiple recordkeeping firms, and an RFP (Request for Proposal) questionnaire and response geared toward the unique needs of a client.
- Detailed data on recordkeepers and their technical capabilities: It's important to understand the different recordkeepers available in the market and their respective strengths and weaknesses. This information is most efficiently collected through partnering your search with organizations that collect and update information on the landscape of retirement plan service providers. These detailed questions and responses allow sponsors to narrow their search to organizations that best fit their service needs and expectations.
- Experience in working with multiple recordkeeping firms: It's important to work with a consultant or advisor who has experience working with multiple recordkeeping firms and can provide you with an unbiased assessment of the different options available to you. Search consultants with experience working with clients at different recordkeeping firms can help identify common areas of concern clients have with various recordkeeping firms that might not easily reveal themselves as part of an RFP.
- RFP response geared toward a client's unique needs: The RFP process is an important tool for evaluating and comparing different recordkeepers. However, it's important to ensure that the RFP questionnaire is tailored to the specific needs of your plan and participants. This will ensure that you are comparing apples to apples with the responses you receive and can make an informed decision that will best meet the needs of your plan and participants. “How many 401(k) plans do you work with?” is an interesting question, but “how many clients have you helped convert from provider A and what lessons have you learned in those transitions?” is more relevant to your experience.
In conclusion, conducting regular searches for retirement plan recordkeepers is an important step in ensuring the success of your plan and its healthy fiduciary governance. A comprehensive search process should include detailed data on recordkeepers and their technical capabilities, experience working with multiple recordkeeping firms, and an RFP response geared toward a client's unique needs. Working with a knowledgeable consultant or advisor can help you navigate the complex process and make an informed decision that will best meet the needs of your plan and participants.
For more information on the importance of conducting regular searches for recordkeepers, download our plan sponsor Guide. This guide begins with a look at why conducting a vendor search may be necessary to satisfy several of a plan sponsor's fiduciary duties under ERISA, followed by a discussion of the numerous practical benefits that result from a thorough vendor search.
The second half focuses on 12 best practices that, if followed, will substantially alleviate the perceived burdens of conducting a vendor search and help guide the plan sponsor to a perfect-fit vendor.
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. Any views expressed herein are those of the author(s) and not necessarily those of Multnomah Group or Multnomah Group’s clients.