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Answering a Key Question in a Request for Proposal

Contributor Scott Simon argues that investment managers have clearly articulated investment philosophies. Here’s why.

‘Tis the season--in the investment industry, the season of Requests for Proposal (or RFPs) by, for example, sponsors of retirement plans subject to the Employee Retirement Income Security Act of 1974 (also known as ERISA). An RFP is a formal document in which a sponsor solicits proposals from qualified firms to perform third-party services such as investment management, record-keeping, or plan administration.

Retirement plans not subject to ERISA and non-profits including endowments and foundations, as well as other pools of money subject to fiduciary precepts, may also choose to issue an RFP, and its requirements should not be any less exacting than for ERISA plans. According to best practices, a sponsor should go to market and issue a new RFP every three to five years in order to ensure that its plan is receiving services that, among other things, are cost-effective.

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