ERISA Advisor Evaluation
To assist plan sponsors with ERISA Advisor Evaluation and drive consolidation of advisory services to qualified specialists, the CFDD is developing an online RFP tool called the EAE.

The EAE will help sponsors find, identify, contrast and evaluate retirement plan specialists who meet their needs. The EAE is not a listing or find an advisor by zip code service. The EAE’s RFP process will focus exclusively on the evaluation of retirement plan specialists rather than vendor or RFP searches.

In addition to professionalizing the advisor search/evaluation process, the low cost, convenient and easy to use EAE will increase the sponsor’s efficiency, reduce their burden and provide insulation by documenting a prudent process.

The credible and referable EAE will also drive cross sales of select products, like fiduciary liability insurance, expanded E&O coverage, designations, etc. More importantly, it will identify the plans and advisors in play. To measure effectiveness, the CFDD will maintain information on who is using the service, the number of searches, popular search criteria and why the winning advisors were selected.

Why EAE
Few plan sponsors are fully cognizant of their retirement plan duties under ERISA. The duties are also rarely prioritized, but the law requires fiduciaries to implement a prudent process for evaluating and monitoring advisors.

Since its inception over thirty years ago, the courts have interpreted ERISA as the highest fiduciary standards known to law. These standards require plan fiduciaries to seek outside experts when they lack the knowledge to fulfill their duties.

Given the reductions in corporate staff, increased liability and decline in sponsor satisfaction, the advisor’s role has never been more important. Sponsors have become more knowledgeable about retirement plans, but evaluating ERISA plan advisors remains a specialty within a specialty. Until now, there has been little guidance available to assist sponsors with this process.

To grow their business, advisors know they must become more efficient, communicate their value proposition, increase activity, improve closing ratios and unwind relationship sales. Given that most marketing expenditures are less than effective, advisors are already recommending the EAE to prospects. Distributor organizations and vendors targeting consolidating advisors have also expressed a strong interest in the EAE.

To compensate for their fear of the unknown, many sponsors make emotional decisions and award business to existing relationships. To facilitate a more prudent process, the CFDD will communicate the duty, liability risk and importance of the advisor selection process directly to plan sponsors. In short, the CFDD will identify the need and the unbiased EAE will provide the solution.

The new EAE website, www.ErisaAdvisorEvaluation, will include both sponsor and advisor areas. To leverage our advisor brand, the ongoing marketing program will include a new EAE newsletter that focuses on the rise in fiduciary breach claims, settlements and litigation. It will also discuss the sponsor’s duties, legislative & regulatory requirements and provide tips on how to evaluate advisors.

The EAE Sponsor Process
The online EAE tool is designed for plans of all sizes and while it contains standardized RFP questions determined by the CFDD, sponsor will have the ability to add, delete, modify or customize their questions.

Participating advisors will also have the flexibility to pre-populate, save and retrieve the standardized questions. This is important because polished responses play a major role in the selection process. They also take time and may have to be approved by compliance.

In addition to the RFP, the base sponsor service will include training & tutorial components, meaningful links and downloads. An optional consulting service will be available on a fee basis to assist sponsors with RFP development and management. The optional consulting service will not include advisor evaluation, but advisors participating in the EAE program must meet minimum standards.

Once the RFP questionnaire is completed, the selected advisors will be contacted and given a fixed amount of time to populate the RFP using a web-hosted system. Upon receipt of all data, sponsors may access an automated scoring system that permits them to weight the responses based on customized preferences. Once the process is complete, sponsors may request additional information or download and forward the report to committee members.

The plan sponsor user fee, tiered by size and complexity, will include access to the online RFP tool and the EAE database until the search is completed or up to one year.

Advisor Participation
To add value and assist sponsors, the CFDD will maintain a searchable database of qualified retirement plan specialists. Advisors listed in the EAE database will incur a nominal annual fee and must meet minimum threshold requirements.

While the sort function allows the plan sponsor to determine their own criteria, advisors must meet the CFDD’s minimum criteria to participate. If the advisor operates as a solo practice, the criteria will apply to individual advisor. If the advisor is part of a team, the criteria would apply to the group, but each advisor will have a separate listing.

The minimum criteria was somewhat challenging because fiduciary standards are evolving and it must meet the needs of multiple market segments, including the small plan market. To remain neutral, it must also meet the needs of individual practices, teams, independent firms and advisors with broker-dealer affiliations.

In addition to meeting the minimum criteria, each advisor must complete a standardized questionnaire profiling their book of business, expertise and services offered. The profiling questionnaire will be used by sponsors for search purposes, sorting and standards-based selection purposes only, i.e., confidential information will not be included.

Both sponsors and advisors are expected to read and accept the conditions. If the advisor declines the RFP, a reason must be provided. When an advisor is no longer under consideration, the sponsor must also provide a reason.

To stay abreast of new EAE developments, please revisit this page in the weeks ahead.