Episode 31: The Impact of COVID, Current Trends, and Culture on Advisor Requests for Proposals (RFPs)

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Hello and welcome to Revamping Retirement, a podcast brought to you by CAPTRUST, where we explore the opportunities and challenges facing today’s retirement plan sponsors and fiduciaries. Our hosts, Jennifer Doss and Scott Matheson, lead the employer-sponsored retirement plan practice at CapTrust, one of the largest registered investment advisors in the U.S. and a thought leader in the retirement plan advisory and consulting space. We hope you enjoy Revamping Retirement.

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All right, welcome back folks to another episode of Revamping Retirement. I’m your co-host Scott Matheson joined by Jennifer Doss, the better co-host. Jennifer, welcome back. We brought on Greg Middleton today. I’m excited to have him. You and I have known Greg for a long time. Greg’s been a cap trust for more than 20 years. He’s a senior director in our marketing group who actually runs our business development and sales enablement group. We have him here for two reasons today. Reason number one is that

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Greg actually hosted a really great webinar on the 12th of August with two of our colleagues, Travis Whitten and Emily Reitzen, on conducting an advisor RFP in the post-pandemic world, best practice sharing there. I was looking at that, debating whether or not we are in the post-pandemic world, but we’ll probably hit on that point a little bit later. But he’s here for a second reason, which is for me the more important reason, because, when we started this podcast and took it over from Mike Webb,

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Greg came to me and bet me 50 bucks that we weren’t going to get past three episodes and this is our fourth episode. So I’m just here. He’s here so that we can collect. So Greg, did you bring your wallet? I did not. I get money too? Yeah, well, you can get your cut. mean, you’re I guess we’re co you can have 25 bucks. Alright. Okay, yeah. You guys take Bitcoin? Definitely take Bitcoin. I do not. Alright, alright, so.

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This is a group of people that likes to talk and I was looking at my show notes that are great producer Karen McCauley put together for me and I guess Greg influenced these because in my show notes for the intro it said that I should talk about what a great guy Greg Middleton is. So I’ve already talked about what he does. I’ve talked about he’s been here more than 20 years, so let me just try and add some things to talk about how great he is. I would say Greg Middleton is a so so friend. I understand he’s.

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a mediocre husband. He’s a heck of a colleague and a world-class dad. I’m kidding, of course, he’s a world-class everything I just said there. And I’m glad that you’re here with us, Greg. Why don’t you do us a favor and tell us a little bit about your group here at CAP Trust and the activity that you’re seeing? Because I think I heard yesterday that we’re on pace to almost double our RFP, advisor RFP volume year over year. And obviously, we’re going to dig into that webinar and get a little behind the scenes with you.

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on some takeaways there too, but give us a little bit of background. Sure. Scott and Jennifer, thanks for having me today. The team, so our team, that’s a fancy title, business development, sales enablement. What does it really mean? It means we help our advisors grow. I know you said we’ve been here, I’ve been here 20 plus years. And really this has just been an evolution. So, you you’ve had a small department and I was, you know, a team of one helping advisors with pretty much anything they needed, whether it was a

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you know, presentation, a reference list, you know, an RFP, you know, a booth at a conference or doing different events. And it’s kind of grown now 20 years later, where our marketing department is a team of 30 and my team is a team of 14. So there’s 14 people now that really help with those efforts. We have, you know, almost 400 advisors who are doing a ton of business development activity. So we got, you know, 13, 14 really tremendous people.

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And they focus on stuff that, you know, we, you we use fancy terms, but we distill it down to there’s a group that does nothing but engages the marketplace. There’s a group that does nothing, but make sure that we have all the right stuff available for whatever the situation is. We have a group that helps create deliverables that prospects specifically need, whether it’s a, you know, first meeting or finals or, you know, an RFP, which I think we’ll talk about a little bit more today. And then we have a group that does nothing, but just focuses on data.

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and it’s data in a couple different ways. It’s the leads database, how many different types of entities are in our target market that we can work with? Are we engaging them? Have we identified them? And then specifically, our own client base. We’ve got almost 3,000 institutional relationships, a lot more wealth relationships as well. And so being able to understand the overview of…

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hey, which of those clients are really good references or which of those clients demonstrate really good experience. And so I’ve got a very fortunate to have a bunch of experts in all those fields. But if you distill it all down, we help our advisors identify and close business and we’re the connective tissue for all the different subject matter experts in the firm that work together to help make that outcome possible. So what I heard, Greg, is you have about 14 people making you look good every day.

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Every day, yes. that a sum? OK, alright. Yeah, they actually typed up all my speakers notes for today, so I needed to make sure that I did that. That’s fantastic. Alright, well, let’s talk about the webinar that you, Emily and Travis did on the 12th. So in that webinar we did talk about post COVID. Again, we can we can kind of talk about whether that’s the case or not, but you guys talked specifically about whether.

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COVID, what impact that’s had on the advisor RFP world. And specifically, I think you touched on a really interesting point, which was, and that we’ve seen play out that I asked you to talk about, which was through all these recent challenges that plan sponsors have gone through, you really got to see how your advisor reacted, how your service provider reacted, and whether you were happy with those services that you received. Those were some hard times to help people through and very chaotic.

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You know, at the end of the day, you turn around and say, like, was I happy with what I got? Or is there something better out there? Right. So talk a little bit about that. Do you that increased volume that you guys talk about? Do you think that this year that’s related to, you know, a backup in demand, basically, from from what we saw last year? Do you think that is related to those plan sponsors kind of reassessing their relationship? I think it’s both. I think what you can say is, you know, the impact of COVID, I think it had a

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You know, it’s funny, there’s a duality of the impact. Like it impacted in a couple different ways, and it’s probably very recent and probably painful. But from my experience, it’s very consistent. And what I mean by that is, you know, I think we’re on pace right now to do, you know, as a firm to respond to 400, know, advisor RFPs. I have either, you know, my 20, 21 years here,

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We really started responding to RFPs in 2002. And I think that year, our first year, like genuinely engaging that approach, I think we did six. And so we’ve seen this steady progression over the years. And I think last year we saw a 10 % reduction. This year we’ve seen a 50 % increase. And if I can take a step back, just the RFP process in and of itself, our team over that,

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period of time, we’ve touched or seen probably 3000 or so different types of RFPs. And we’ve seen them in all different shapes and sizes, whether it’s a million dollar startup or a $6 billion multinational firm, all different types of entities. And so we’ve seen the range of it. And so we feel very confident. But for plan sponsors, they probably have done like two of these total, right? And they do it every three to five years.

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And what ends up happening is you got to remember that the RFP really is a evaluation process. It’s a filter process. They want to go through and screen out. They’ve got five to eight, maybe 10 different people that they like that they’ve heard of. So how do I get it down or how do they get it down to three or four? And so the three or four that they get it down to, they base it off of what these responses tell them. And so for that process, the filtering process, the first cut at it,

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is very similar to how the RFP template ends up. 80 % of most RFP templates are very standardized. It is the check the box, very binary, either the advisory firm that’s responding, they either are a fiduciary or not, they have resources or they don’t, they have a process or they don’t. And so the vetting of that happens pretty systematically. And then the last 20 % of the RFP really are things that are specific to that entity.

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Why are they going out to RFP? Are they having problems with deferral rates? Are they having problems with their provider? Are they having problems with discrimination testing? Whatever it is, that’s what that last 20 % is. And they want to see how the responding firms address those topics. And that really distinguishes all of them. And so from that 80-20, I’ll transition that to the 80-20 of what a fiduciary is supposed to do. So 80 % of the time,

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they’re going to cover normal, you know, foundational elements to your plan to make sure things are in order. But that 20 % really addresses things that pop up every five to eight years that really nobody planned for, but it’s got a very serious impact on your plan and you need guidance, right? You need an ability to navigate through that knowing that, you know, managing your retirement plan is not your full-time job. And so during my 20 years, examples of those are the Enron scandal, right? Sarbanes-Oxley.

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the mutual fund scandal, the Great Recession, the Pension Protection Act, and then most recently, everything that we’ve experienced over the last 15 months with what’s happened with COVID. And so for that, those things that pop up really are when you need an advisor the most, because those are the unique things that really can have a dramatic impact on your plan or how you’re administering it or really

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your ability to accomplish the goals and objectives for the plan. And when that happens, what better validation do you have that you either made a good decision or you didn’t because that advisor delivers it. And so Jennifer, if I’m answering your question, what happened last year is when COVID happened, I’m sure a ton of people did not have COVID on their to-do list in 2020. They probably had an RFP.

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that got delayed because they had to figure out how their organization was going to respond to COVID. You know, do we transition the workforce to virtual? Does the company stay in business? And so a lot of those decisions we saw, you know, a lot of activity through March and then it just kind of came to a halt or the stuff that was happening. Deadlines kept getting extended as to when they were going to make a decision or when they were going to work on it. And so we have seen some of that stabilized and probably a lot of the

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that were going to happen have seen an uptick, probably 50 % uptick this year, an activity compared to last year. But the other opportunity, the duality aspect that I mentioned, not only did COVID interrupt their ability to do an RFP, but it also gave them an opportunity to really evaluate if their plan is being, you know, if they have the right partners in place, you know, helping them navigate through things like the Rescue Plan of the CARES Act.

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Or more specifically, think about all the participants who probably had a ton of questions immediately about financial well-being or can I take a loan or what type of advice can you give me? And you you’ve hired people to give you those resources. You may or not have leaned on them in past years, but you probably needed them over last 15 months. And if you weren’t happy with what happened, that is, you we’re seeing a driver of that too. Like there were some things that maybe they had an allocation that didn’t.

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you know, pan out well based on the volatility of the market. And so all of those things rolled into one. Those are good opportunities and good drivers of why RFPs have happened. And we’ve seen in some of the RFPs, we’ve seen some questions about how you responded to your clients over the last 15 months. So that’s probably a much longer answer than you look for. But that’s really been the impact of what the last, I would say, year or so has had.

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seen an uptick in activity. I think it’s a combination of people got distracted or got delayed, and I think people weren’t happy with the some of the services that they thought they were getting from their partner providers. Yeah, such a good point too. And you know, just hearing you talk about all the things, because you and I have a comparable career span data. I I got you by a year data back to the 90s in this industry and so. Reliving all those those.

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different 10-year floods, which seem to happen more frequently than 10 years for sure. But I think the RFP tie back that you point out is so good, is that this is 80, you know, the Pareto principle, right? It’s like this is 80 % that really just is kind of check in a box, make sure you can walk and chew gum at the same time and you have the appropriate credibility to be in the business. But the difference makers is really that 20 % where it’s case studies and things of that nature.

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And I’m sure you also see a lot of trends pop up and new questions and that 20 % will call it. I guess coming back to you with a question here is one of your jobs. You one of the things you do. Maybe it wasn’t a job. This is something you kind of innovated with your group was trying to see where that puck is headed and make sure we’re swinging at the right pitches. And so you see and are able to pull out a lot of market trends from RFPs. I’m just kind of curious what are some recent trends that you see that are worth noting?

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in terms of questions or what people are asking us for. Yeah, well, I already touched on the one aspect. Those we’re seeing our fees that are asking specifically what happened or what you’ve done over the last 15 months, which is just great. And there’s always going to be a version of that. But some of the other ones that are more trend oriented and wouldn’t say is maybe over the last six to eight months, maybe over the last couple years. You know a few things around.

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like data security. It really started off with business continuity and disaster recovery, trying to understand like if something happened, do you have a backup that allows everything to be still functional as needed? And then that has trended into cybersecurity. And I think we’ve all seen enough press over that over the last six months. But a lot of those questions really boil down to, do you even have a policy? Do you even have

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a department, do you have a CTO or chief technology officer? And if so, how are you guys approaching this? Because I think even the Department of Labor earlier this year came out with some guidance and it’s it’s varies a little bit. At the advisor level, there’s some specific things at the provider level, the record keeper level that probably have more access to employee level. There’s more detailed information, but in general they just want to know what our opinion is or what our approach.

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is on that. Couple others that come to mind ESG investing, diversity, DEI. They want to know what our opinion is or what our capabilities are in both of those. And then, you know, trying to understand, you know, our opinion about recent events. You know, people want to know your experience with their current providers. And they also want to know your opinion about different things that have happened in the market place like recent consolidations and how

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that’s happening. those are just a couple of things that have popped up. As far as the last, I’d say probably like three years or so that are on the minds of plan sponsors.

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Great, Greg. Well, thank you very much. We’re actually going to take a quick break so you can gather your thoughts. And I need you to get ready because we saved all the hard questions for when we come back. But right now, we’re going to take a break to hear from Mike Webb with our minute from Mike. So Mike, take it away. Thanks, Jennifer and Scott. When people hear health savings accounts or HSAs for short, they typically don’t think retirement. However, HSAs can partner well with traditional retirement savings plans, such as 401ks and 403Bs.

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And in some ways, HSA plans can be as good or even better than those accounts. But what is an HSA anyway? Let’s first start with high-deductible health plans, because that’s a key to HSAs. In a high deductible health plan, employees must meet a minimum spend of medical expenses before insurance picks up any part of the tab. In those arrangements, an HSA serves as a vehicle to save money for those out-of-pocket expenses. HSAs are only available to employees who participate in these high deductible health plans. So simply put…

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No high deductible health care plan, no HSA. So what does health care savings have to do with retirement anyway? Well, let’s talk taxes first. Like 401k and 403b plans, HSA contributions are not subject to federal income taxes or state taxes in most states. However, unlike 401ks and 403bs, HSAs avoid FICA or FICA Medicare taxes. So that’s a key to retirement savings. HSAs avoid all the taxes, not just income.

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But here’s what HSAs also see an advantage over retirement accounts. HSA account balances, including any earnings, are not only not taxed when you put the money in, but they’re tax free at distribution as well when used for medical expenses. Now, if they’re not used for medical expenses and taken at age 65 or later, they like 401(k) and 403(b) distributions. That is, ordinary income. Now, withdrawals for non-medical expenses prior to age 65 are subject to a 20 % penalty.

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Now, HSAs also are confused with FSAs, or flexible spending accounts. But unlike FSAs, HSAs are not use it or lose it vehicles. If you don’t spend all your HSA savings on your healthcare needs during a given year, that money gets rolled over to your following year and it can grow just like a 401k and 403b can. But here’s the HSA catch. Compared to retirement plans, the contribution limits are low. $3,600 for individuals with self-only medical coverage and only $7,200 for family coverage per year.

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There’s an age 55 catch up as well, but that’s only $1,000 a year. Ultimately, HSA’s for those employees with access to them, however, should be considered as part of a thorough and thoughtful retirement savings plan. For Revamping Retirement, I’m Mike Webb, and this has been your Minute with Mike. Now back to Jennifer and Scott. All right. Thanks, Mike. Appreciate it. We are back with Greg Middleton. And again, I promised him all the hard questions are going to come next. So I do want to ask actually a

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kind of a hard one, I think, for us—a room that’s really important to us. So I want to talk about the role of culture. You talked about that 80-20, right? And I’m sure in the 20%, you know, there’s in the 80, you talk about maybe, you know, a firm’s resources. How many people do you have doing this? How many people do you have doing that? But maybe in the 20, you try to hit on the culture of a firm, right? When you’re trying to select them and make sure there’s a good fit. I guess, can you talk about why that’s important? And, you know, what are some of maybe the questions that plan sponsors are asking to kind of gauge that cultural fit?

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Yeah, the. You know, cultural aspect ultimately is the tiebreaker, right? Because if this is a vetting process, you started out with more than five. You get it down to three. Three of them have, you know you. These are your finalist. You’ve got him in person. You narrow it down to two. They look so even on paper. What’s a tiebreaker? What’s something that that will distinguish one versus the other based on whatever you’re trying to achieve?

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with the outcome of your process. That’s something that we’ve seen that you shouldn’t really gloss over. It should be something you should focus on. And it ultimately defines your relationship, because this is not a transactional process, right? Like you are hiring a partner, you are going to be working with them for hopefully years to come. So you want to make sure that they’re a good fit. And to your point, yes, they are.

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Technically sound, but are they good people? Do they align with your organization? Will they respond to your call in a timely way in the right way? And culture is a big driver of that. A few different ways that that’s been asked or the ways that are are probably most telling is, you know, hopefully everybody has a mission statement or core value. So you want to, you know, be prepared to talk about that or ask those questions. You also want to talk about, and I know a lot of people talk about.

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Like conflicts and tell me how your employees are compensated. You know, is it by certain measures? Because you want to look for independence and objectivity. But some of the real telling questions is tell us how you recruit quality individuals. Tell us what you do to reward good employees. Tell us what you do to help their professional growth and development. Tell us what you do for your work environment, like.

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Like how would you measure a successful environment? How would you measure a successful relationship with us? Those are a couple of areas that are good, but the ones that really hit home is when the organization itself has a mission statement or they have core values or they have a vision statement or they have things they want to achieve, and they specifically ask, what are you going to do to help us achieve this? Or how do you feel?

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that your mission or your values align with our mission and our values. And those are really unique questions that I think if I don’t think it’s like they’re not hard because they should be genuine. Responses should be genuine. And if you see it on paper, it should create a clear cut match and selection for an advisor partner. But that’s that’s how it’s evolved. And again, it’s a it’s the plan sponsors preference if they want to go that deep into it. But when we’ve seen it.

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It really solidifies the decision and the match and you know in the end. Yeah, that’s it’s so good and it’s like people talk about culture all the time and it’s what is culture. It’s really just how. You treat other people and how you feel when you’re treated by those other people in an organization or with clients and so much that shared values is important there and you we I think you hit on the right with our best relationships with our clients are not just transactional. Their deep relationships and.

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You gotta have shared values and aligned aligned interests for sure. Alright, I’m going to deviate from Jennifer’s plan to ask you a bunch of hard questions. I’m going to ask you a little bit of a little switch would be more on lighter note if you will. We’re pretty interested now because you’ve seen I don’t know how many questions, but it’s gotta be in the 10s of thousands. of thousands. always having to one up me. 10s of thousands would have been fine. Accuracy OK, accuracy is fine too.

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Alright, so then of all those, I hope you read them all before you came. Now that I’m going to ask you this question, which is what would you say was the best RFP question you’ve ever gotten? And then go ahead and tell me what the worst or most obscure or head scratching question you’ve ever gotten was. Best question. I mean, I hate to say it, but we just talked about it. It’s the cultural ones because it’s the one that like you actually can pour your heart into if you’re. I know it sounds.

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I don’t know, dopey or a little, you know, altruistic, but if you’re really demonstrating your value and you’re it’s just it’s awesome to be able to write that type of stuff. So any version of that is is my answer for the best. It didn’t sound dopey Greg as much as it sounded like you just took the easy way out of answering that question, but I would agree with you. That is that is probably the best. Thank you for the worst question. The. It’s actually a tie.

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For some of the entities that are multinationals or that have massive procurement departments, there’s some forms or attestations or responses that are mandatory, such as treaties that are happening in the Middle East or our opinion about certain bans in Northern Ireland or things that are going on in the Sudan.

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you’re like, this has nothing to do with retirement plans, but it’s part of the process to where you have to fill these things out because it’s a multinational organization. And these are things that are part of their purchasing and procurement. And we have to actually put content together for that. So that was a new one. But the other one that just, you just shake your head at was sometimes for whatever reason, the plan sponsor puts page limitations.

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or restrictions on what they want to get back, which is fine. Like they want to, if they’re out to 20 people, they don’t want to thousands of pages. They want to trim it down, which is fine. But one of them was just so unreasonable. They said that your response could not be more than five pages, which is like, okay, we’ve, you know, we can work around that guys. Their, their list of questions was six pages. So they gave us six pages of questions.

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And they said your response has to be five pages or less and you don’t. It’s hard because you want to assume positive intent or positive intelligence. And so you’re engaging with that person to say, hey, I just want to respectfully ask. And they were very adamant like, five pages and that’s it. And so that was a unique one. But yeah, those are ones that pop up top of my mind. Smallest font we’ve ever used on an RFP response.

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That’s I was going margins and font. Yeah, I school and college term paper experience kicked in on that one. Oh, you could put links to other places. I wonder if you could have done that. Greg, I’m just there were a ton of attachments. They were like, please see attached. Please see this. Please see that. That’s how we got through. Yeah, OK. All right. Last question. And I do actually think this one’s a hard one because it’s personal. And that’s why we kind of like to again retirement is personal. We like to ask this question of all of our guests.

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So Greg, we want to know what does retirement look like for you, Greg Meddleton? What are my choices? What are the options? Is this a multiple choice question? The world is your oyster, Greg. Wow. That’s a good one. You could just continue to work here. mean, that can be your retirement if you want, but I’m giving you options. Good. Well, hopefully it’s prolonged, right? Let’s hope it’s not just one year or two years. So let’s start with that.

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You know, I think it’s a I don’t know if I have a set plan for but I do know the components of it that I’d like to enjoy. I do want it to be an active retirement full of experiences, right? Like you want to go and have just a very rich and fulfilled, you know, life and that’s that’s what I want. I’m full of experience. I would prefer experiences. We have a 10 year old and a six year old. We have a son and a daughter and we talk about we want to make sure we’re giving them experiences and not stuff.

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And so trying to have as many of those things happen, but then not wait until you’re quote unquote retired to like try to like squeeze as many of those things in now while you can. And then as they get older, have other experiences. But one thing that’s on my bucket list is, and I get jealous from other coworkers who just came back. We had one who just did this trip and I’m insanely jealous, but I want to pack the kids up and the family up in an RV and drive across country like Clark Griswold. Like I want to go explore and go see a bunch of different things.

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And so, so yeah, it’s just, you know, I’d probably simplify it, Jennifer, and just say, you know, just an active retirement full of experiences that are rewarding and shared with, you know, friends and family and people I care about. That’s really good. It’s also going to be great to see Greg going across country in an RV with a 30 and 26 year old kid. So, by time he retires.

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All right, Greg, well, we really appreciate your time. Thank you for joining us today and diving deep with us. All right, that’s gonna do it for our podcast today. Just as a reminder, if you do wanna listen to the webinar that we were talking about, Greg, that he did on the 12th of August, you can get that replay on our website. That would be great. And then also, we know that you guys are super excited every time we come out with one of these episodes and you wanna know when it’s ready.

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know the best way to do that. Subscribe via your favorite podcast app. We also want to hear from you. So if you want some feedback, if it’s about Greg, that’s OK. If it’s about Scott and me, you know we may read it. But anyway, yeah, leave us a review. Let us know if you have any questions and thanks for joining us today.

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The discussions and opinions expressed in this podcast are that of the speaker and are subject to change without notice. This podcast is intended to be informational only. Nothing in this podcast constitutes a solicitation, investment advice, or recommendation to invest in any securities. Cap Trust Financial Advisors is an investment advisor registered under the Investment Advisors Act of 1940. Cap Trust does not render legal advice. Thank you for listening to Revamping Retirement.