Have you thought about your provider reviews? It can be done virtually you know!

Bart Heenk, Jun 3, 2021 11:22:37 AM


This blog looks at a case study of the virtual evaluating process and provides insight into how this process can be done successfully

optimistic outlook on the virtual tendering process

As part of our PERX initiative, Avida International regularly hosts industry roundtables providing a forum for Pension Fund executives to come together and exchange insights on important topical issues. This roundtable provided a discussion on the virtual tendering process and how it can be done successfully and efficiently, despite the challenges of operating within a virtual space. The case study provides an optimistic outlook to those wishing to engage in the virtual tendering process. 

Our guest speaker was the chairman of a pension fund in a large, multinational corporation, whom we helped orchestrate a virtual tendering process. They have multiple pension schemes across Europe. The UK accounts for almost 60% of their assets under management (therefore, it was important to be aware of the undergoing regulatory change in the UK).  

They have had a fiduciary advisor in place for all plans across Europe and sought the assistance from Avida International to establish whether this arrangement continued to be fit-for-purpose.  

We were especially intrigued by their assignment, because it covered funds in 7 different countries.  At the outset the trustees of this corporation were asked to carefully consider if they were genuinely committed to re-tendering, given the amount of effort and energy, which would be involved for both the organisation and also those who would express an interest in participating in the process.  

One individual importantly noted, that in 2005, there was a change in attitude which emerged amongst funds. Funds which previously had been very much dependent on external advisors, began to think more about what functions should be carried out internally and which made more sense to outsource.

commencement of the process  

The process commenced with a long list of 30 potential suppliers, and how that was initially reduced to 10 and eventually to the 3 potential providers who would all have the capability to provide a world-class service. The key determining factor for them had been their desire to identify a provider who would share their co-creation vision. 

The corporation had been prompted to put the mandate out to tender for 3 reasons: 

1). The fact that the Competition and Markets Authority (CMA) in the UK had made it clear that they wished to see funds re-tender their advisory mandates at least once every 5 years. 

 2).  They had worked with the current fiduciary advisor for ten years, and wanted to benchmark their services against the current market leaders. 

 3). The current incumbent is very reliant on their business and therefore the corporation wishes to have a plan B. It was decided to commence the tender process, virtually, in the summer of 2020 on the assumption that face-to-face meetings would feature later in the year, as circumstances permitted. However, considering the continuation of the pandemic, the entire process ended up being a virtual one. 


 What did they learn, and in particular what insights would be of interest to others in the industry, who might be inclined to shy away from a virtual tender process? 

 It provided an opportunity to gain valuable insights into the organisational culture of potential service suppliers. 

By designing a very detailed questionnaire we obtained a very detailed explanation of how each organisation operates. The responses received differed very significantly. Then, during the virtual meet and greet events it was possible to probe and observe how individuals interacted with each other. It was also possible to conclude which seemed the most hierarchical and the ones that operated together better as teams.  

 It was important for the corporation to establish the organisations that would begin with the needs of their clients and distinguish them from those who would focus on their own processes and technology and go from there.  

 A lot was learned about how innovative or otherwise these organisations appear to be. 

The three shortlisted organisations were provided with 3 case studies, one on the new UK Pensions Act, another relating to ESG and the final one which focussed on how they would handle changes to Dutch pensions legislation and what this would imply for an investment committee. 

Under normal circumstances, we would expect the process to conclude with spending a few days in the offices of our shortlisted candidates, but we ourselves were pleasantly surprised at how much we had managed to learn virtually and how comfortable we were with the decision we came to. The virtual tender process had therefore been a huge success. 

impact of the COVID-19 pandemic

The roundtable discussion then focussed on a question posed to all funds present – whether the pandemic crisis had prevented them from formally reviewing their advisory arrangements?  

Yes. In many cases the incumbents were reappointed without a tendering process. 

A number of interesting insights emerged: 

  1. “This is how we do it”

Most advisors are totally committed to their way of doing things, which can be incredibly frustrating when trustees have a complex issue they need advice on. This can be especially problematic for smaller schemes who may not be sufficiently attractive for the major advisory houses. 

        2. Proper advice versus key-person risk?

The major advisory houses seem to focus more on selling their own products than actually providing quality advice. In theory, a solution would be to use the tender process to identify an alternative from amongst the “smaller” advisors. Whilst arguably some of the highest quality people are to be found there, this exposes the fund to key-person risk. 

  1. What you think you are buying versus the service you actually experience 

Simply put, the individuals who convince a fund to sign up for the services of an advisory firm are often not those who the client actually gets access to.  

  1. Single versus multiple advisors?

It can be very difficult to manage the competing interests of players in a fund where for example WTW and Mercer represent different sides. One could argue that the competition between the two should bring advantages, but equally the effort involved in co-ordinating the two can quickly erode such potential benefits. Having sufficient internal resource may be the answer, but how big does a pension fund need to be to justify focussing on its internal resource rather than seeking external help? 

  1. Love me tender

A decision to enter into a tender process should not be taken lightly. Perhaps more effort and time should be devoted to making partnerships with existing service suppliers work, and devoting the time saved to enhance the quality of external talent.  

However, the purpose of this case study is to demonstrate that the virtual tendering process is something which can be done well, despite the challenges. We at Avida believe this process takes time and work but as shown can be done successfully 

We have developed a significant expertise in this area; having established our organisation in the Netherlands to help pension funds there with the challenges they faced, as this market began to develop almost two decades ago. Therefore, we have a unique service provider evaluation capability available through our "AIGS©" (Avida International Investment Government Scorecard).

Learn more about "AIGS" here:





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