Should You Issue an RFP to Select Your Next Investment Advisor

Should You Issue an RFP to Select Your Next Investment Advisor

Understand the pros and cons of issuing a formal Request for Proposal in the search for your nonprofit’s next investment advisor.

An investment management Request for Proposal (RFP) is a formal document nonprofit organizations use to solicit proposals from investment consultants and advisors. While RFPs can be an effective way to make informed decisions, there are also some additional complexities to consider. Here are some pros and cons of using an RFP:

Pros of Issuing an RFP:

  • Competitive Bidding: RFPs encourage competition among potential providers, which can lead to more competitive pricing and improved quality of proposals.
  • Standardization: RFPs provide a structured and standardized way of comparing proposals, facilitating an effective evaluation and selection of the best investment partner.
  • Clear Requirements: RFPs allow organizations to clearly define questions, requirements, and expectations, reducing misunderstandings or disputes later on.
  • Transparency: The RFP process is typically transparent and open, which can help build trust and confidence in the selection process.
  • Risk Mitigation: By evaluating the capabilities and services of potential providers, organizations can mitigate the risk of selecting an unreliable vendor.

Cons of Issuing an RFP:

  • Time-Consuming: Managing an RFP requires a time commitment from your oversight committee members to distribute the document, coordinate with respondents, and evaluate proposals.
  • Limited Flexibility: RFPs are often too rigid to address evolving considerations during the selection process. Most responses are qualitative, leading to subjective scoring.
  • Unresponsive Proposals: Some providers may submit generic or non-responsive proposals, which can result in wasted time and effort during the evaluation process.
  • Lack of Responses: An RFP can be an onerous undertaking that discourages some advisors from responding.
  • Lack of Customization: RFPs may not allow for customized solutions, leading to a one-size-fits-all approach that may not fully meet your organization’s unique needs.

Is Issuing an RFP Right for You?

In summary, RFPs can be an effective tool when used appropriately. They promote competition, clarity, and accountability, but they also come with the drawbacks of being resource-intensive and potentially inflexible. Organizations should carefully consider their specific needs and available resources for the project when deciding whether to use an RFP or explore alternative procurement methods.

Have Second Thoughts About Issuing an RFP?

Issuing an RFP may not be the right solution for some organizations. If the cons outweigh the pros of doing an RFP, download our resource, “The Alternative to an RFP: A Simplified Approach to Selecting Your Investment Advisor” to consider an alternative approach to finding the right investment partner.

We’ve helped many nonprofits establish investment programs.

eCIO has been selected by nonprofits nationwide to manage their investment programs. Our engagement with these organizations has occurred through both formal RFP processes and direct hiring without RFPs. Click here to schedule a 15-minute complimentary consultation with one of our investment advisor experts to learn more or to have us participate in your RFP.

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Download a PDF version of this resource.

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