Top 5 Tips for Changing Advisors

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Plan sponsors seek to evaluate their advisors for a variety of reasons. As part of a plan sponsor’s fiduciary duty to monitor, you might be due for a routine check of the market. Or maybe you’ve been with your advisor for a long time and aren’t sure they’re still the best choice for your plan. In other cases, things aren’t going well, service is poor, or prices have grown too high and you’re ready to find a new partner.

A recent study conducted by Fidelity found that 1 in 3 plan sponsors fall into the last category and are looking to change advisors. If you’ve determined that it’s time to change advisors, then it’s time to go to market. Here are the top 5 tips for changing advisors when you’ve decided to do a search, and the top 5 pitfalls to avoid.

Top 5 Tips for Changing Advisors

1. Utilize sample RFPs

To begin, spend some time researching sample RFPs online – this will help determine what questions you should be asking and fill in any important details you may have missed. A thorough RFP is a critical component for success.

You can find a sample RFP here. (This sample RFP is only adequate for a consultant search under ERISA 3(21); more information would be required if considering an ERISA 3(38) discretionary manager for your plan menu.)

2. Invest time in researching candidates

Be sure the candidates you’re sending an RFP to are the most qualified for the job, not just the most persistent markets or providers that you’ve heard of through the grapevine. Instead, ask peers who they recommend, or work with a search consultant who has in-depth research on qualified advisors.

3. A pro will always use good tools

When you’re ready to start sending RFPs to candidates, invest in a good software program that is specifically made for RFPs to help you stay organized. If investing in a tool isn’t an option, send RFP answers in a spreadsheet so you are able to compare each organization’s answers side-by-side.

4. Don’t rush

Pace yourself when crafting and distributing the RFP and allow candidates plenty of time to respond. Give candidates a chance to ask questions about the RFP and then distribute answers to all candidates to make sure no one has an unfair advantage. Also be sure to give yourself enough time to read and clarify the answers you’ve received from candidates.

5. Hire a Search Consultant or other professional to help with the process

The selection of a new advisor is a daunting task. Knowledgeable and unbiased guidance can have one of the largest impacts on successfully finding the best partner. With in-depth knowledge of the industry’s most competitive relationships, a search consultant can help you find the best candidates, and save you time and money. ERISA attorneys can also be of assistance, at least in evaluation of some criteria.


Tip 5 Pitfalls to Avoid When Changing Advisors

1. Beware of pay-for-play and other biased arrangements

Some electronic-RFP providers and industry groups use pay-to-play arrangements where they get paid directly or indirectly by winning candidates, and others accept advisor advertising or research dollars. Others may trade referrals with ‘strategic partners’ or preferred vendors. This latter example is frequently found in attorney relationships, even when the attorney is well intended. Watch out for these pay-to-play arrangements that might not provide the best candidates for the job.

2. Make sure candidates treat RFP questions like the SATs

RFP answers should address exactly what your question is asking. If it doesn’t, is it a dodge? There are no trick questions, but there are trick answers. Be sure you get a proper response, or go back for clarification.

3. Don’t let finalists present their “pitch”

When you’ve narrowed down your candidate pool and are ready to start hosting finalist meetings, be sure to give each candidate a proposed agenda and a time frame to keep them on subject, instead of simply letting them present a sales pitch.

4. Don’t avoid hard questions

The goal of your search is to source the optimal provider for the job. When doing so, remember to ask the hard questions that will warrant the answers you need to hear. This is due diligence, not a spectator sport. Some tough questions revolve around conflicts of interest. Ask questions like, “Do you ever cross-sell other services to plan participants?” and, “Do you accept marketing support or referrals from fund managers or recordkeepers?”

5. Don’t forget to check references 

Speaking with previous clients can tell you a lot about an advisor. Be sure each finalist can provide references, and don’t forget to check them. The references should look like your company and/or your plan. Make sure the candidate has experience with plans and fiduciaries like you.

Running an RFP on your own is a big process, one that can take up to 130-150 hours total when done right. Working with an experienced search consultant like North Pier Search Consulting can help you significantly save time, as well as select the best partner and services and help negotiate fees. Learn more about how North Pier Search Consulting can help lead your advisor search by getting in touch today. Our services often pay for themselves.

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