Running an RFP Isn't a Vote of No Confidence in Your Advisor
Running an RFP Isn't a Vote of No Confidence in Your Advisor
A request for proposal is a monitoring exercise, not a termination process. Plan sponsors have a duty under ERISA to monitor the services and fees of the providers they hire, and a competitive evaluation is the standard way to do it. Incumbent advisors frequently win these processes. When they do, the plan sponsor ends up holding something they did not have before — documented evidence that the arrangement is competitive.
That is the short answer. The longer answer is about why so many committees never get there.
Why do committees avoid evaluating an advisor they like?
Because the evaluation feels like a judgment on the relationship rather than on the arrangement. This is the most common reason advisor evaluations get postponed, and it has nothing to do with fiduciary duty, budget, or time.
The advisor has been at every quarterly meeting for nine years. They took the call in March 2020 when nobody knew anything. They know the CFO's kids by name. Putting that out to bid feels like telling someone who has done nothing wrong that you have been quietly shopping around behind their back.
Plan sponsors describe this in almost identical language, over and over: this is politically sensitive, there are relationships in play.
The instinct is a decent one. Loyalty to people who have served you well is not a character flaw. But it produces a specific and expensive outcome — a committee that has not tested its arrangement in a decade, and cannot demonstrate that it ever tried.
Is an RFP a vote of no confidence in your current advisor?
No. An evaluation tests the arrangement, not the person, and the two are genuinely separable. An advisor can be excellent at their job while the fee structure has drifted out of line with a market that has changed considerably since the contract was signed. Neither of those facts says anything about the other.
It helps to notice how the same exercise reads in other contexts. Rebidding an insurance program is routine. Reviewing an audit firm is expected. Nobody treats either as an accusation, because everyone understands the exercise is about the market rather than the incumbent.
Advisor relationships attract more emotional weight because they involve one recognizable person who sits in your meetings, rather than a firm that sends invoices. That is understandable. It is not a reason to treat the arrangement as exempt from review.
How often should you evaluate your retirement plan advisor?
The Department of Labor does not formally require plan sponsors to run a request for proposal at any set interval. But in its fee disclosure rulemaking, the agency stated its assumption that plans normally conduct RFPs from service providers at least once every three to five years. Annual fee benchmarking is generally understood to supplement that cycle rather than replace it.
That distinction matters and it is frequently misstated. There is no rule requiring an RFP every three years. There is a regulator whose written assumption is that competent plans are doing one roughly that often — which is a different thing, and in practice a more demanding one, because it describes the baseline a fiduciary is measured against rather than a box to tick.
Courts have taken note of long gaps. In one case, a federal court found it significant that plan fiduciaries had not issued a recordkeeping RFP for more than twenty years. In another, an appellate court indicated that fiduciaries who had not run RFPs at roughly three-year intervals carried real litigation risk.
A workable cadence for most plans looks like this: benchmark fees annually, run a full competitive evaluation every three to five years, and document both.
Is benchmarking enough, or do you need a full evaluation?
Benchmarking and a competitive evaluation answer different questions, and the difference is not cosmetic. Benchmarking compares your fees against reported market data. An evaluation asks providers to compete for your business and tells you what they will actually offer you, at your plan size, with your participant profile.
Reported averages and live bids are not the same information. A benchmark tells you where you sit against a distribution. A live proposal tells you what is available to you specifically.
Benchmarking is faster, cheaper, and appropriate as an annual practice. It is not a substitute for periodically finding out what the market will actually do.
Can your current advisor run the evaluation for you?
They can, and many offer to. The difficulty is structural rather than a question of anyone's integrity: the party being evaluated ends up designing the evaluation, choosing who to compare against, and interpreting the result.
That arrangement can produce an honest outcome. Plenty of advisors would run it fairly. But it produces a record with an obvious weakness, and the record is the point of the exercise. A file showing that the incumbent selected its own comparators documents a relationship rather than a review.
The question to ask is not whether your advisor would be fair. It is whether the resulting documentation would persuade someone who assumes they were not.
How do you tell your advisor you are running an evaluation?
Directly, early, and framed as routine — because it is routine, and treating it as delicate is what makes it feel like an accusation.
The most common mistake is waiting. Committees agonize privately for months and then deliver the news as though confessing to something, which guarantees the advisor hears it as a verdict already reached. Telling them at the start, as a scheduled item of governance, changes the conversation entirely.
Language that works, and that committee chairs are welcome to borrow:
"We are putting a formal evaluation cycle in place for all our plan service providers, and this year it is the advisor relationship. This is not about anything you have done — you have been good to us. It is that our documentation needs to show we test these arrangements periodically, and right now it does not. I wanted you to hear it from me first, and I would like you to participate."
Three things are doing work in that. It names the process as standing policy rather than a response to a problem. It separates the person from the arrangement explicitly, which spares them from having to ask. And it invites them in, which reminds everyone that the incumbent is a candidate rather than a defendant.
What if the advisor reacts badly?
Most do not. Strong advisors understand that a competitive process they win is worth more to them than a relationship nobody has tested — it converts a client's good opinion into evidence. Some ask to be evaluated for exactly that reason.
An advisor who treats a routine governance exercise as a personal betrayal has given the committee information it did not have before, at no cost. That reaction is worth noting in the minutes, without drama and without drawing conclusions from it on its own.
It is worth being honest that a small number of relationships do get strained by this. That is a genuine cost, not one to wave away. It is also considerably smaller than the cost of explaining to a regulator, a board, or an attorney why an arrangement went a decade without being tested.
What should the evaluation produce?
A file that answers five questions without anyone present to interpret it: who was evaluated and how they were identified, what was compared, where the market information came from, who made the decision and on what basis, and when the next review is scheduled.
Notice what that file is for. It is not primarily a tool for changing advisors. Most of the time it documents a decision to keep the one you have, which is the outcome committees want and the one they are least equipped to prove.
Believing your advisor is competitive is not the same as being able to show it. Only one of those survives the question being asked three years later, by someone who was not in the room.
The reframe worth keeping
An evaluation is not an accusation. It is how a committee earns the right to say, on the record, that they chose well.
The advisor you were worried about offending comes out of a well-run process holding independent evidence that they are competitive — something they could not generate for themselves, and something worth having.
If your committee has been putting this off because of the conversation rather than the arrangement, that is worth naming out loud at the next meeting. It is the most common reason these evaluations do not happen, and it is a much easier problem to solve once somebody says it.
Frequently asked questions
Is running an RFP a vote of no confidence in your current advisor? No. An RFP is a monitoring exercise required by a plan sponsor's duty to oversee service providers. Incumbent advisors frequently win competitive evaluations, and when they do, the plan sponsor gains documented evidence that the arrangement is competitive.
How often should a plan sponsor evaluate its retirement plan advisor? The Department of Labor does not require a set interval, but has stated its assumption that plans normally conduct RFPs from service providers at least once every three to five years. Annual fee benchmarking generally supplements that cycle rather than replacing it.
Does the Department of Labor require an RFP? No. ERISA requires a prudent process for selecting and monitoring service providers, but specifies no particular method or frequency. The three-to-five-year figure is the agency's stated assumption about normal practice, not a rule.
Can our current advisor run the RFP for us? They can, but it creates a structural problem: the party being evaluated designs the evaluation, selects the comparators, and interprets the results. The resulting documentation is weaker precisely where it needs to be strong.
Is benchmarking enough, or do we need a full RFP? They answer different questions. Benchmarking compares your fees to reported market data. A competitive evaluation tells you what providers will actually offer your plan. Benchmarking is appropriate annually; it does not replace periodic live competition.
What if we have never run an evaluation? Start now and document it. Courts have treated very long gaps as significant, but the relevant question at any given moment is whether a prudent process is in place going forward. The first documented evaluation is worth considerably more than continued delay.
