A request for proposal, or RFP, is an important tool when selecting an investment advisor. Non-profit leaders have a fiduciary duty to select advisors in a prudent manner, and by executing a formal RFP process, organizations can fulfill their responsibility by interviewing multiple advisors in an efficient and comprehensive approach.
To provide firsthand experience into the RFP process we spoke with Andrea Ells, CFA, CFP®, a volunteer investment committee member of YWCA of Rochester & Monroe County, New York. Andrea has extensive experience with RFPs in both her professional career as a financial advisor and in her volunteer experience. The YWCA recently concluded an RFP and looks forward to continuing its mission of eliminating racism, empowering women and promoting peace, justice, freedom and dignity for all.
Here's insight from Andrea on how her committee conducted the RFP and the process for non-profits:
1. Why did your organization decide to issue an RFP?
Our Investment Committee made the decision to initiate an RFP mostly due to the time that had passed. We were not unhappy with our current investment advisor and did not initiate an RFP with the thought that we were going to make a change. The truth is, this is not an easy or quick process, but we felt this was the best way to reevaluate the options available to us and take a fresh look at our investment portfolio.
2. How did you select who would spearhead this effort? Did you have a separate RFP committee?
When we made the decision to move forward with an RFP, we established a dedicated sub-committee. I volunteered to help drive the process given my previous experience working with RFPs. My understanding of how the process worked, the information that would be important to obtain through the questionnaire sent to the investment advisors, as well as the criteria often used in making a final selection was paramount in leading the initiative. Two other Investment Committee members, along with the Chair of the Investment Committee, volunteered to be part of this sub-committee as well. So, in total, there were four of us working closely on the project.
3. What sort of background did you provide to give respondents insight into your organization?
It was important to us that all potential advisors truly understood the organization’s mission and goals, information on our current portfolio, as well as administrative details of our selection process. Given this, we included the following in our RFP outline:
- A list of service expectations to ensure the responding investment advisors had a clear picture of what the Committee was seeking. Examples of expectations included a requirement that the advisor act as a co-fiduciary, assist with objective-setting for the YWCA’s portfolio, as well as present performance reports virtually or in-person at least four times per year.
- An overview of the YWCA of Rochester & Monroe County, including our mission, vision and history.
- High level information on how the portfolio was currently positioned, as well as the spending policy.
- Criteria that we planned to use to ultimately select our investment advisor.
- A timeline of anticipated dates in the process, including deadline for submission, finalist interviews and when to expect a final decision, as well as instructions on completing and submitting the proposal.
4. How did you come to a consensus about which advisor to choose?
The process of coming to a decision was not easy! After reading through all of the responses received, we asked each Investment Committee member to independently select three or four firms as finalists. Once that individual process was complete, we met as a committee to discuss the individual selections and narrow the list down to five advisors for finalist presentations, with one being our incumbent advisor. After those presentations, we continued internal discussions, and invited three firms to attend a Q&A session with our committee so we could address a few final outstanding questions. Lastly, as a committee we held one more discussion and then voted. Although the vote was not unanimous, there was a clear majority in favor of one advisor who we hired shortly thereafter. Surprisingly, after entering the RFP process with no specific intention of switching advisors, we ended up hiring a new investment advisor.
5. What advice do you have for organizations that are considering initiating an RFP?
Although the process can be a commitment, it’s important as fiduciaries to ensure you are performing adequate due diligence on your existing investment advisor(s), as well as comparing your advisor to other potential candidates. Even if you may not be unhappy with performance or the level of service of your existing advisor, it is still important to document the RFP process periodically – even if just to confirm the committee’s decision that you are in the right place.
Though you may be pleased with your current investment advisor, you could end up finding another firm that provides a better service experience and preferred investment strategy for the organization. You’ll never know unless you go through with the due diligence.
You do not need to come up with the RFP questionnaire from a blank page – there are plenty of resources available that can assist you in developing a comprehensive list of questions to pose to your RFP candidates. In fact, many investment advisors will happily send you a list of sample RFP questions to start from.
Thank you for your insight, Andrea!