PLANSPONSOR - June/July 2021 - 26

RESEARCH | 2021 RECORDKEEPING SURVEY
Identify the Most Important Criteria
An RFP covers substantial ground, so before starting the
process, it helps to narrow the criteria to what is most important.
" If a sponsor is doing a search to resolve issues, we want to
make sure we understand what those issues are, " Malcolm says.
" We want to help the committee identify: What are your main
'pain points'? Is it that your participants are having trouble
navigating the recordkeeper's site? Is it day-to-day operational
issues? Is it the service you're getting from the recordkeeper's
relationship manager? "
Sampson encourages committees to identify upfront the
two or three issues they think are most crucial in the search.
It works better, he has found, to start the committee discussion
with a concise list of potential key issues, rather than just asking
members to give their personal opinions about what they feel the
issues are. The potential priorities list could include variables
 Plan Tenure with the Provider
l <1 year
4%
l 1 - 3 years
l >3 years
12%
84%
Source: 2020 PLANSPONSOR Defined
Contribution Survey
 Total Number of DC Plans, by Participants
l <10 participants
l 10 - 50 participants
161,123
137,420
l >50 - 100 participants 38,735
l >100 - 500 participants 40,530
l >500 participants
15,162
such as technology, fees, investment flexibility and the financial
wellness program. " It's important to find out at the beginning
what issues are more important than others. " he says.
In surveying today's technology-focused recordkeeping
marketplace, committees often overlook the importance of
the " human factor, " Hanna says. " When you have such a
competitive landscape, and so much of recordkeeping is now
technology-driven, the biggest differentiator often can be the
relationship manager or managing director who would be
assigned to work with that particular sponsor, " he says. So
when comparing recordkeepers, it is crucial to consider the
number of plans your potential relationship manager already
serves. " If [he] is assigned to 15 to 20 plans, then you likely can
expect a more-consultative relationship and for the relationship
manager to be more proactive, " Hanna says. " If the [person] is
assigned to 70 or 80 plans, then you can expect more-reactive
and less-consultative service. "
Know the Fee Proposal's Assumptions
Recordkeepers' technology costs have steepened, and at a time
when fees for their core administrative work have compressed;
that is changing the pricing models significantly, Ray says. Often,
proprietary asset management fees are baked into the proposal.
A recordkeeper's fee proposal may stipulate that the plan would
need to have at least a minimum threshold percentage of its
assets-50%-in the provider's mutual funds, he says. It is also
not unusual to see a proposal requiring the use of that recordkeeper's
proprietary target-date fund (TDF) family and/or stable
value fund, as a large percentage of a plan's assets typically are in
those investments, he notes.
Recordkeepers are integrating more of their own products
and services, such as custom target-date funds, on their platform,
Hanna says. " As we see these new products be introduced,
we need to have a keen eye on what assumptions are being used
when a recordkeeper provides its pricing quote to a plan, " he says.
For example, a recordkeeper's fee quote may be dependent on
re-enrolling a plan's participants into the provider's TDF family.
" You may find that it's not 'apples to apples' when you try to make
comparisons between recordkeepers' bids, " he adds.
Plan fiduciaries need to understand the potential risks in
49%
of responding
recordkeepers
offer multiple plan
service models
86,000
DC plans turned
over in 2020, due
to the RFP in a
competitive bid
situation
using a recordkeeper's proprietary mutual funds, Sampson says.
" It's important to look at, what are the discounts available for using
a proprietary fund or a menu of funds, and are those investments
appropriate for your plan? " he says. " It's one thing to use a proprietary
fund just because you're getting a discount on the recordkeeping
fee. It's another to get a discount for using a proprietary
fund that can stand alone on its own merits. So you need to ask
yourself, 'Would we use this fund independent of that fee concession?'
If you would, then it's OK to take the fee concession. "
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PLANSPONSOR - June/July 2021

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