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Automating the Institutional Investing RFP
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Deb Castellani
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Deb Castellani,
User Rank: Apprentice
7/3/2014 | 10:09:21 AM
Re: A better way is available
Ariana,


Kent and you are providing such a great service to the fiduciary world.  We, like you, cannot believe how antiquated the industry is and how "stuck" they are in their ways.  I think one of the biggest reasons for resistence is the fees consultants make by "assisting" their clients with the "old" ways.  If they used technology like, InHub or The FIRE System, they would lose hours and hours of billible hours.  And who knows, their consulting advice may be proven wrong!

 

Great to see you and Kent helping fiduciaires protect themselves, their clients and their participants.
Greg MacSweeney
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Greg MacSweeney,
User Rank: Author
7/3/2014 | 9:56:51 AM
Re: A better way is available
Thank you for sharing the data! This is really helpful, especially for companies looking at this type of technology. By knowing others are actively using the eRFP tool, they are more likely to consider it.
Ariana Amplo
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Ariana Amplo,
User Rank: Apprentice
7/3/2014 | 9:40:00 AM
Re: A better way is available
You are welcome!  Since the launch a few months ago we have completed 3 eRFPs, with another 3 in progress and 5 more starting shortly.  These have ranged from a $1m 401(k) plan, to a $20m Foundation, to a $120m Defined Benefit + Defined Contribution combo plan, etc - with investment committees of all shapes, sizes & sophistication levels.  So far the feedback is that it cuts the time, meetings and emails needed amoungst the committee in half, if not more.  
Greg MacSweeney
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Greg MacSweeney,
User Rank: Author
7/3/2014 | 7:31:54 AM
Re: A better way is available
Thank you for the additional information. How many clients does InHub have and how many RFPs has it processed?
Ariana Amplo
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Ariana Amplo,
User Rank: Apprentice
7/1/2014 | 1:36:39 PM
A better way is available
What a great conversation!  I could not agree more, with everyone.  I think what has held the Investment vendors (managers, consultants, recordkeepers, and others) from creating this technology is they are good at what they do, but something like upgrading the RFP process isn't a priority.  Although the people that work at these Firms are often early-adopters, the companies themselves are usually slow to implement, especially technology...most are probably still using an outdated Outlook suite as we speak.  They are happy enough to get the RFP and the opportunity to compete for the business. 

I believe there is shift happening right now - all 401(k) Plans, Defined Benefit Plans, Foundations and Endowments have a legal responsibility to follow a 'prudent, documented process' to hire (and evaluate) all vendors.  This can only be accomplished through an RFP.  Only the largest organizations have the luxury of hiring an RFP Consultant to help, the rest are stuck doing it on their own (on average it takes 100+ hours).  Many small companies put it on the 'back burner' due to lack of time or know-how from the CEO, CFO or HR Directors or other committee members. 

BUT the technology is out there...finally!  A new website just launched last quarter, to help investment committees better manage the RFP process in an efficient & streamlined manner.  It includes the flexibility to add custom questions and candidates (or pick from a list) and invite the entire committee to review proposals online, tablet friendly.  Like 'basecamp + sharepoint + virtual consutling' for institutional RFPs.  This is the first big step the industry has seen toward automating this extremely important process, and documenting it better than ever!  Happy to provide more info if anyone wants, or you can watch a quick video here.   

 
IvySchmerken
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IvySchmerken,
User Rank: Author
6/30/2014 | 10:17:32 PM
Re: slow to adopt
Jonathan, that is a good point. A regulatory catalyst might be needed to jumpstart an automated RFP process in investment manager selection. Regulators tend to want more of an audit trail. One potential catalyst could have been the Madoff crisis, where many endowments and charities lost millions by  giving money to Madoff without much due diligence. Regulators might want to see why a particular endowment, foundation or even hedge fund chose a particular manager and what other firms did they consider. What was the decision process? The search process would be documented in an automated RFP.
Jonathan_Camhi
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Jonathan_Camhi,
User Rank: Author
6/30/2014 | 12:20:09 PM
Re: slow to adopt
It always amazes me how manual processes are still so common in financial services. There's usually some kind of catalyst for automation, often regulatory I've found. Regulators want things kept track of. That's hard to do with manual processes. I wonder what the catalyst here could be.
IvySchmerken
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IvySchmerken,
User Rank: Author
6/30/2014 | 10:42:07 AM
Re: slow to adopt
It's hard to believe that boards of directors are still using the U.S. mail service to send questionnaires to one another for an RFP in the multi-trillion dollar investment management business. They could take advantage of PDFs and secure sites such as Box, Drop Box, among others. What about collaboration tools such as Share Point? I also agree if consultants are earning $1 million fees from this antiquated process, there is no incentive to make it efficient as they would probably experience a steep decline in business.

 
Becca L
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Becca L,
User Rank: Author
6/29/2014 | 7:18:33 PM
Re: slow to adopt
Ha, When you read the US Postal Service's still has a prominent role in the process, you have to admit, it's time for an upgrade. "Still stuck in the stonage" indeed!
Becca L
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Becca L,
User Rank: Author
6/29/2014 | 7:15:44 PM
Follow the Money
Kent, thank you for this article. It's really very interesting to see this gap in process upgrades.

If you're looking for a reason why this area lacks innovation, maybe follow the money: "shockingly high consulting fees," and "$1 million in consulting, attorney, and staff fees to complete one RFP" Those with the know-how to expedite this process may not see the economic benefit of automation.

That being said, this is an obvious opportunity for new business. At the FinTech Innovation Lab Demo Day, one of the firms of great interest was pymetrics, a "next generation job marketplace" that uses neuroscience and big data to help match candidates to jobs. The presenter claims companies using these techniques see massive efficiency gains in recruitment and overall performance of the new candidate. In conversation with those in the program, it sounds like it REALLY grabbed the attention of FinServ companies. To be honest, I didn't really see why the demand for automated requirement tools is SO strong, but after reading this, I think I have an idea. It would certainly help speed along the arduous process that you've described.
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