Nonprofit organizations need quality services, delivered at an appropriate price, from providers who understand and align with their organizational values and/or mission. In evaluating service provider(s) and/or conducting periodic due diligence for your investment program, a request for proposal (RFP) can be a valuable part of the management toolbox.

As a fiduciary, it can be in your best interest to issue an RFP periodically, and as needed in response to issues with your current provider, to determine that your organization (and its investment program) is receiving the service it deserves.

In this article, we share seven key steps for an effective RFP process and provide a list of sample questions.

Why Issue an RFP?

An RFP is a standardized list of questions sent to prospective vendors that can aid you in choosing the best solution. Reasons nonprofit organizations issue investment management RFPs can vary from receipt of new assets and changes in investment goals to board changes and current provider concerns.

Through its standardized approach, an RFP allows your organization to evaluate the landscape of prospective vendors side-by-side and compare their abilities to address your organization’s key needs, objectives and concerns.

What Are Our Next Steps?

Once your organization decides to issue an RFP, there are key steps to keep the process efficient and effective.

Step One: Establish an RFP Committee

Your RFP Committee will complete all of the next steps and is crucial to the success of your RFP. This committee simplifies your search and narrows the RFP to focus on your organization’s specific need and goals and aims to have diverse representation from various internal stakeholders. However, do not mistake this for needing a large committee; three to five individuals is appropriate.

Step Two: Identify Potential Providers

If you have a current investment management services provider, you will likely include the incumbent as a candidate. From there, your entire RFP Committee should have a voice in the selection process to help mitigate potential for conflicts of interest among service providers, staff and committee members. Potential firms can be selected by screening local service providers, scanning online directories, using personal referrals or by a number of other methods. Be sure to limit the number of service providers who receive the RFP to a manageable number. This will help streamline your review and process.

Step Three: Determine an RFP Timeline

Your RFP Committee should identify clear milestones and due dates before issuing an RFP. This timeline will enable your organization to appropriately allocate resources and monitor that each identified need or goal is being met. It is easier to establish the timeline working from the end of the process to the beginning. The RFP timeline should consider:

  • When does your organization want to convert? Do you need to give your existing provider notice? How long will it take your organization to prepare for this transition?
  • When will your organization make a final selection?
  • Do you want to use the proposals to narrow down the providers and hold finals presentations or do you simply want to select based on the proposal? If you are holding presentations, what is the date?
  • How long will you need to evaluate the proposals? Are you going to allow time for follow-up questions to the providers? What is the due date for proposal submissions?
  • Are you offering a question-and-answer period for the investment management provider? When is the deadline to submit questions to you? Tip: Respond to all potential providers once to avoid any bias.
  • When is the proposal due?
  • When are you issuing the RFP? Tip: Make sure you are giving providers enough time to offer a thorough, well-thought-out proposal.

Step Four: Develop the RFP

This step is essential to confirm that you gather the information that is most important to your organization.

Open with an overview section that tells the story of your nonprofit and its mission. The overview should include details that would allow an investment manager to offer a thoughtful and custom solution, including:

  • investment policy statement and holdings;
  • expectations and current situation (successes    and disappointments);
  • current financial objectives;
  • future financial goals; and
  • required reporting.

Considerations when Developing an RFP

Schedule a brainstorming session to gather the collective experiences, concerns and goals of your RFP Committee and the organization’s leaders. This can help determine the most relevant information to be gathered to select the correct provider. 

Next, you will want to begin drafting questions. The questions should be asked in a manner that helps you to decide between responders. Be strategic as to how and what you ask. Avoid duplicate questions, as this often confuses providers and you may have to search through erroneous information to find what your committee needs. Also, avoid grouping may be missed. When crafting questions, your RFP Committee should also be mindful of the number of questions. Balance the level of detail requested with each inquiry and be purposeful in your request. The goal is to receive meaningful responses for your comparison and review. 

Deploy the RFP

Once your organization decides on what to ask, the RFP Committee should organize the questions by sections. This will aid in your review of multiple proposals and helps to avoid duplication. It will also allow the providers to tailor their responses through a better understanding of the questions you are asking. 

Create your RFP in a standard format, such as Microsoft® Word. This will help prospective investment management providers respond timely in an easy-to-read format. You will need to indicate in your instructions when the proposal is due, where it should be sent, if you want electronic files (PDF format) or printed books and the number of copies preferred.

Consider the complexity of your  questionnaire; custom responses will take time and thought. If your RFP is short with simple questions, a 10-day turnaround may suffice. If your organization’s RFP becomes part of the contract or requires granular and specific responses, it may be more appropriate to allow the investment management provider roughly a month to respond.

Step Five: Review the Proposals

You have created an RFP to gather the information most important to your organization. Now it is time to carefully review the submitted proposals. Each member of your committee and leadership team should receive the proposals to review prior to meeting as a team. Each person should prepare notes, opinions, and list anything that was a differentiator.

It is recommended that you determine your evaluation criteria prior to distributing the RFP. While each organization will have unique requirements and value the attributes of each prospective service provider differently, establishing a standard evaluation system will help to eliminate bias and confirm that each evaluator approaches the process in a uniform fashion.

One way to create an evaluation system is to use the major sections in the RFP document as a guide. In this approach, you would list the attributes within each section that are most important to the committee and then assign a score or weight to each attribute. This can help with the comparison process.

Step Six: Narrow Down the Candidates

Your organization is now at the final stage of the process: conducting interviews with final candidates and selecting the winning firm.

Your RFP committee and other decision-makers need to meet with the highest scoring providers in person. This is a good opportunity to collect more details on the firms and their procedures. Be sure to allow sufficient time for providers to explain their proposals to your team in relevant detail. Determine in advance the criteria you will use to make the final selection. A possible tie-breaker situation question may help with this decision.

Step Seven: Make a Selection

Once your RFP Committee selects the winning provider, confirm the terms of service and outline the transition process. Let the other service providers know they were not selected and identify any specifics that were key in the decision not to select them. It is important to provide specific feedback about what a provider did well and, perhaps more importantly, did not do well.

Conclusion

Issuing an RFP can be a time-consuming process, but it is an important tool for fiduciaries. Whether in response to concerns with your current provider or as part of periodic due diligence, it can help you to evaluate if your service provider remains appropriate for your investment program’s needs.

For more information, please reach out to your PNC representative.

Sample RFP Questions[1]

Firm Overview 

  1. Provide the name, title, address, telephone number and email address of the individual we should contact in respect to your proposal. 
  2. Provide a brief and general summary of the firm/parent organization and the unit that would provide investment management services to endowments and foundations. 
  3. How long has your firm been providing discretionary investment services? 
  4. Explain any potential for conflicts of interests that could be created by your firm providing services to our organization. 
  5. Describe your errors and omissions coverage. 
  6. Within the last five years, has your organization been involved in any business litigation, legal proceeding or regulatory investigation? 
  7. Provide a description of your organization’s commitment to diversity, equity and inclusion. 
  8. Provide a description of your organization’s commitment to nonprofits in the communities where you provide services. 

Client Experience 

  1. Identify your client service model.
  2. Identify the team who will be dedicated to our organization. Provide detailed biographies, experience with nonprofit organizations and the number of clients supported.
  3. Identify additional personnel resources that will help the team listed above support our organization. Provide detailed biographies and experience with nonprofit organizations.
  4. What is the accessibility of the team listed above?
  5. What unique educational, thought leadership or client service capabilities will you offer our organization?
  6. Will your representative(s) meet with our investment committee at our location? How frequently? What will be reviewed at these meetings?
  7. Describe how your firm provides continuity of service in the case of professional turnover.
  8. Describe your firm’s policies regarding the confidentiality of client information.
  9. What information/reporting is available online?
  10. How would you assist our investment committee in meeting fiduciary responsibilities?

Investment Management Services

  1. List all of the standard services provided with your discretionary investment management solution.
  2. What is your investment philosophy, and what is your approach to carrying out this philosophy?
  3. Address the development, collaboration of investment policy statements, portfolio construction and adjustments to the portfolio/policy.
  4. Do you recommend an active or passive approach to investing? Why?
  5. What investment vehicles do you use and recommend? Is there a proprietary fund requirement?
  6. Describe your approach to risk.
  7. Provide a hypothetical portfolio based on our current IPS. Please show historical returns (one-, three- and five-year).
  8. Describe how benchmarks are chosen and how performance is compared to similar portfolios.
  9. State what you believe distinguishes your investment management services from your competitors.

Manager Research and Selection

  1. Do you have a team dedicated to investment manager research, selection and monitoring? If so, please describe.
  2. Do you maintain a database of managers/funds? If so, is the database compiled internally or purchased from an outside vendor?
  3. Describe your manager selection process.
  4. Describe your ongoing monitoring and due diligence of managers. 
  5. How many managers do you currently track?
  6. Describe the criteria you would use to determine that a manager should be terminated.

Performance Measurement and Evaluation 

  1. Describe your performance monitoring system. 
  2. How frequently do you produce performance evaluation reports for clients? Do you review the reports with the client in person? 
  3. Describe the types of analysis included in a typical performance evaluation report. Please provide details as to what is included in your report or include a sample.
  4. Can your performance reports be customized to meet our specific needs? Please explain.
  5. What do you believe sets your performance measurement and evaluation apart from the competition?

Custody Services 

  1. Does your firm offer custodial services? If so, provide a summary of services.
  2. Are cash balances automatically invested? Describe.
  3. Are there additional costs for custodial services?
  4. What do you believe sets your custody services apart from the competition? 

Nonprofit Focus 

  1. Do you have a team dedicated to nonprofit organizations? If yes, please describe this team.
  2. Describe your experience with nonprofit clients and any special products/services you offer to this segment. Include a breakdown of your endowment and foundation client base by client type and range of asset size.
  3. Provide three (3) nonprofit client references that have been with your organization for more than two years and are similar in size and purpose.
  4. Describe your subaccounting services.
  5. Describe your planned giving program services. 
  6. Describe your responsible investing services.