Selecting the right investment advisory services is crucial for investors and organizations looking to grow their assets. The request for proposal (rfp) process allows clients to evaluate investment advisors thoroughly before making a hiring decision. This article outlines the key elements to include in an rfp for investment advisory services to ensure you find the best advisor for your needs. When drafting the rfp, clients should provide detailed information about their organization, investment objectives, assets under management, and service requirements. The rfp should require advisors to disclose their qualifications, investment processes, reporting capabilities, technology infrastructure, fees, and references. Evaluating responses side-by-side allows easy comparison of advisors’ capabilities and fit. Having a scorecard for rating proposals also helps objectively identify the best advisor. Overall, a well-crafted rfp increases transparency and positions clients to select the ideal investment advisory services partner.
Summarize your organization background and needs
The rfp should begin with an overview of your organization or account profile. Provide details on your history, ownership structure, assets under management, investment goals, risk tolerance, and any specific investment requirements or restrictions. This context allows advisors to understand your needs and tailor their responses. For example, a non-profit organization with $50 million in assets will have very different priorities compared to a $5 billion endowment fund. Outline your ideal relationship with the advisor, including expectations for meetings, reporting, customer service, and length of contract. Clearly stating your requirements upfront ensures responses directly address your needs.
Require details about the advisor’s qualifications and processes
A critical section of the rfp should require details on the advisor’s credentials, capabilities, and investment approach. Ask advisors to provide an overview of their firm, years in business, ownership structure, number and qualifications of investment professionals, total assets under management, and types of clients served. Require they disclose their investment philosophy and decision-making process. For example, do they take a passive or active approach? What research informs their investment selections? These factors provide insight on how your assets will be managed. The rfp should also request the advisor’s policies for monitoring risk, ensuring best execution on trades, avoiding conflicts of interest, and maintaining regulatory compliance. Reviewing qualifications, expertise, and processes helps determine which firms are most capable of meeting your investment objectives.
Request details on reporting, technology, and customer service
Ongoing reporting and client service are key components of an effective advisory relationship. The rfp should require examples of the types of reports provided to clients and the technology platforms used to deliver them. Reports should summarize portfolio holdings, transactions, and performance against benchmarks. Look for user-friendly online portals with 24/7 access to your account details. The rfp should also ask about response times for inquiries, account management team structure, and resources dedicated to client service. Firms that emphasize transparency and communication are better positioned to collaborate effectively.
Ask advisors to disclose their fees clearly
The fees charged by an investment advisor can vary widely depending on account types, assets under management, and services provided. The rfp should require a detailed fee schedule with all relevant rates, minimums, and payment terms disclosed upfront. Common fee structures include percentages of assets under management, fixed project fees, and hourly rates for financial planning. Look for fee-only advisors (rather than those receiving commissions for products) to minimize conflicts of interest. The rfp should state your preference for flat or tiered fee structures. Reviewing and comparing fee estimates from multiple advisors ensures you understand the all-in costs of each relationship.
Request and check client references
An advisor’s track record working with clients similar to your organization provides valuable insight into their capabilities and service levels. The rfp should ask advisors to provide two to three client references willing to discuss their experience. Checking references is an important step to gain confidence in an advisor’s reputation and confirm their ability to meet client expectations. Ask references about the advisor’s communication style, transparency, reporting, customer service, responsiveness to inquiries, and success meeting investment objectives.
Crafting a detailed request for proposal allows thorough evaluation of investment advisor qualifications, services, fees, and company culture. Comparing submissions side-by-side and checking references increases transparency in selecting the ideal partner to meet your investment needs and obligations to beneficiaries. Overall, taking time on the front end to create and execute a thoughtful rfp process leads to finding the best investment advisory services for your requirements.