Some investment management firms may need to build new relationships with outsourcing service providers for a host of different reasons. But selecting the right partner can be a painstaking, time-consuming activity. The request for proposal (RFP) process has barely changed in a decade – and arguably much longer than that – for ’40 Act and institutional asset managers. This is despite newer and more complex services, technologies and delivery capabilities which are constantly emerging and being requested today in outsourcing relationships.

RFPs simply haven’t kept pace with the business services they support

In fact, there is now a vast catalog of disrupting capabilities which may be underutilized (or even completely ignored) by the standard RFP process. Search and selection has become stale. Process consistency and discipline is hard to enforce. And the traditional phased approach is often no longer delivering as it should. Most of us recognize that there are numerous ways RFPs can be improved. But challenging an entrenched status quo isn’t easy in any context.

To kickstart broader industry debate on the RFP process, we convened a workshop with several of the industry’s largest service providers. Topics for discussion included:

  • What works in RFPs today?
  • What doesn’t?
  • How might we all align around a better way of doing things?

Optimize the RFP process: Identify the pain points and make adjustments 

Ideas from our workshop ranged from simple quick-wins right through to radical reforms. But one thing was abundantly clear: by identifying the root causes of pain points in current processes, even minor adjustments could cumulatively lead to transformational change. And they could do so without having to completely destroy the existing model and create something entirely new.

During our workshop, we identified a number of RFP pain points. Here are four of the key ones (and how to go about solving them):

Pain Point #1: RFP documents are just too long – so simplify them

The length and structure of the RFP questionnaire was overwhelmingly the biggest area of concern cited by service providers (beating the next concern by a 2-to-1 margin). Specifically, they felt the scope of services in an RFP document is often just too broad and provides limited transparency into the requesting firm’s strategic objectives. On top of this, functional questions sometimes seem redundant and metrics can be inconsistent and difficult to reconcile.

When combined with tight submission timeframes, lack of document standardization can lead to inaccurate and/or generic responses. Some RFPs require service providers to coordinate a dozen different departments and upwards of 30 individuals. It can require a Herculean effort to get this done, particularly if the investment manager is imposing an aggressive timetable, but it can also increase the chance of error or incompleteness in the end result.

The solution? Simplify and restructure the RFP document.

This simplification should start by separating the RFP into two distinct components:

  • Key drivers and guiding principles for issuing the RFP: The first section, arguably the most important, should be short and to the point: no more than 20 questions about the must-have requirements that deserve highly customized responses (such as support for specific product complexities, the firm’s strategic goals or managing advances in technology).
  • Services being requested: The second section should ask for service providers to give a comprehensive description of their capabilities about the services being requested, thereby eliminating the need for an extensive questionnaire.

This two-way split will allow service providers to spend more of their time and energy answering the most important questions – those that will ultimately form the basis of the firm’s decision.

Pain Point #2: Communication and transparency is lacking – so engage earlier

Service providers told us transparency and communication are often lacking throughout the RFP process, especially in the early stages. They also felt they aren’t introduced to key people quickly enough.

This creates numerous problems in responding to an RFP, including being able to ascertain the actual business drivers behind the proposal (whether cost reduction, product coverage, expanded capabilities or anything else) and accurately describing the capabilities required.

Furthermore, as the RFP process progresses, service providers say they frequently lack feedback on the extent to which they’re meeting investment managers’ objectives.

The solution? Engage service delivery teams early

In practice, we recommend dedicating a two- to three-hour session during the first stage of evaluation for each RFP respondent, which should include subject matter experts from both organizations. To aid preparation, investment managers should provide discussion points or use cases for these sessions.

For service providers, the focus of these sessions should be on demonstrating the service level experience for the investment manager, not just regurgitating the written RFP response. That means, for example, demonstrating interactions within an end-to-end trade lifecycle or showing how core technologies would be leveraged.

Proofs of concept (POCs) are a good example of this kind of “experience building”. POCs allow investment managers to get a sense of the “look and feel” of the service provider’s core system and digital capabilities – and whether and how they could work for the firm’s requirements.

Pain Point #3: Service providers aren’t mindreaders – so explain the end-state vision

Over 60 percent of workshop participants said they had difficulties understanding the strategic goals of the investment manager issuing the RFP. That’s a problem because these engagements typically result in long-term contractual partnerships.

The solution? Be transparent

Having a clear understanding – from the outset – of the vision for the end state of the partnership is vital for effective planning. What’s more, without knowing where the relationship is ultimately headed, service providers can’t properly articulate in the RFP response how they will develop the value-added services that would support the strategic goals of the investment manager.

This is all the more important in today’s fluid and unpredictable business environment, where strategic plans must adapt and evolve with market changes and technology disruptions almost daily. Being transparent about the strategic destination from the outset means the service partner could better explain how they can help the investment manager navigate the inevitable ups and downs of that journey.

Pain Point #4: Complexity can be an obstacle – so keep the RFP process focused on specifics

For service providers, one of the most challenging aspects of an RFP is presenting a reliable quote for their services. Voluminous questionnaires, lack of transparency into the investment manager’s business and uncertainty about the strategic roadmap can lead to assumptions that impact the pricing model. These models can be complex and vary by service provider. So it’s not difficult to see how a lack of clarity on only a few variables can mislead stakeholders and distract them from the end goal, which is to select the best service partner.

The solution? Keep it simple, keep it relevant

A well-orchestrated RFP process can navigate some of these challenges. It’s important to design the RFP to obtain the critical information that’s needed to reach a decision.

To drive a more reliable quote, observe these critical success factors:

  • Stronger metrics around funds, asset types, volumes etc.
  • Clarity around scope of services – in writing and through early engagement
  • Provide a strategic roadmap for service providers to clarify the future demand for services

Where do we go from here with the RFP process?

There is a tremendous opportunity to transform the RFP process and bring it more closely into line with today’s business expectations. The four points outlined above represent a great place to start. Combined, they highlight a key point: significant improvements can be made to existing RFPs without having to completely overhaul the approach.

I’d like to thank our workshop participants for sharing their invaluable thoughts and insights. Building on the suggestions here, we hope to spark a broader discussion among investment managers and service providers about making the RFP process work better for everyone.

So let’s keep this conversation going. To find out more or discuss further, please get in touch with me directly at