In 2013, Abell Pest Control, a company with 450 employees across Canada, decided to switch its benefits consultant in an effort to improve the level of service for its employees.
“We pride ourselves on providing the highest customer service we can for our customers, but we weren’t providing the same level [of service] for our own employees,” says Sara Cromwell, human resources manager for the company. After seeking recommendations on LinkedIn and through industry networking events, Cromwell invited a few consultants to pitch for the work.
As a longstanding family-owned business, Abell takes pride in caring for employees like family, she says. Changing consultants was a scary decision. “But we had to align ourselves with someone who shared our own values. The key was getting a lot of references to soothe the fear of not knowing if the new broker would provide the same level of service that we provide. I had to be confident that the decision I was making was for the best interests of my employees.”
Two years on, Cromwell says Abell is very pleased with the change. “The brokers we switched to have a customer service and family culture as well — you could tell by talking to every one of their employees that they were happy and believed in the business.”
Switching consultants is more likely with benefits or defined contribution plans, since defined benefit tends to favour longer-term commitments, due to actuarial needs and the difficulty of transferring technical knowledge. It’s a similar story for investment consulting, which is often built on long-term relationships and requires deep client and plan knowledge, says Tony Gaffney, chief executive officer of Aon Hewitt. “However, clients will often engage firms on a project basis where particular specialties are required, in areas such as alternate investments or asset/liability work.”
Changing a core consultant for benefits and pension advice is a big decision, but it doesn’t happen very often, he adds. “That said, there is a trend toward higher levels of activity in health benefits as more attention is placed on rising healthcare costs and the sustainability of plans. We see clients that are no longer satisfied with the value being delivered by their consultant in terms of quality of advice, service or relationship. Frequently, they are looking for deeper expertise, greater relevance in terms of industry experience, innovation and better results.”
Another potential driver is HR professionals changing their roles. “This is happening more often than in the past,” says Sarah Beech, president of Accompass. “When that happens, they may be more comfortable bringing in consultants they already know. Or the client may be looking for different levels of service, or their advisors move to a different company or retire. All are factors that may influence a switch.”
While he doesn’t believe switching consultants is happening more frequently, Demetri Demopoulos, senior consultant and retirement leader for Towers Watson, notes companies may be looking around more often now than before.
“There are a lot of cost pressures these days, and big companies especially have governance issues they must manage,” he says. “They may be testing the waters and asking around to make sure they are comfortable with what they are paying. Most organizations stay put once they are comfortable and establish a relationship with a consulting team. But if they do decide to move — while cost may be a driver — it’s usually because you get to the bottom of the scope of work, and you don’t have the right team in place. Consultants that can’t bring in the expertise, or an approach tailored to the client’s specific needs, risk being replaced.”
But Faisal Siddiqi, national leader for the retirement services and wealth practice with Buck Consultants, has noticed a switching trend, especially over the last five years. “A lot of public sector and larger organizations are doing governance checks requested by the pension committee or board of directors,” he explains. “They want to make sure they have the right services for the right price — and the right consultant. As well, since 2012, larger clients have been hiring consultants for special one- or two-year projects such as plan designs, de-risking or whatever else the current consultant isn’t able to do.”
Employers may also hire a second consultant for a specialty project if they need a specific skill set or subject matter expertise they feel their existing consultant doesn’t have, says Gaffney, such as analytics, health strategies and absence management. Or an employer may hire an outside consultant as a “test drive” to determine the fit relative to the existing one. “This may happen as a pre-RFP [request for proposal] step, or if [there is] no RFP, it may be a way of exiting the current relationship and having a ‘soft place to land,’” he adds.
Go or no go?
When a company decides to end a relationship or hire another consultant, it usually goes to market with an RFP to explain what it’s looking for and the services the new consultant must offer.
The University of Calgary, for one, was looking for a new advisor for its total rewards program (including compensation, group benefits, pensions and employee recognition) nearly three years ago. It issued an RFP asking bidders to provide examples of their experiences and services relating to the university’s goals and challenges for the short to medium term. As well as reviewing and commenting on insurance carrier policies and negotiating rates and charges, the university wanted its benefits consultants to benchmark the plans in the marketplace and to report on competitiveness and trends.
“When considering a change, it’s key to develop and ask the right questions based on your challenges and goals,” explains Rhonda Pylychaty, University of Calgary’s director of total rewards and human resources. “Considerations regarding flexibility and responsiveness are also important in our ever-changing environment.”
From a consultant’s perspective, “submitting a response is time-consuming and costly,” says Colleen Baker, senior director of business development and global benefits with The Williamson Group. “And the RFP may not even be genuine, since some organizations may merely be price shopping or looking to leverage costs with their current consultant. In larger organizations, RFPs are often a form of due diligence and, at the end of the day, they will not make a decision to move.”
But an RFP is a sales opportunity on paper, she adds. “The response must be written to influence the decision-makers to hire us instead of a competitor. It has to highlight the consultant’s strengths, expertise, communication and ability to spend time understanding the needs of the company. Since most RFPs do not provide an opportunity to meet the organization, most of your response is based on your interpretation of the organization and the why of the RFP.”
Baker says consultants need to consider several factors before making a bid:
- Which sector is the company in?
- What products/services does it offer?
- How long has it been in business?
- How many employees does it have?
- Are they unionized, non-unionized, retirees or all of the above?
- How many locations does it have?
- Who are the decision-makers?
- Are key decisions made outside of Canada or the U.S.?
- Does it have a track record of sending out RFPs for due diligence?
- Based on the sector/company type, what differentiators can the firm offer?
Other consultants stress the importance of establishing a relationship first.
“Responding cold to an RFP is very difficult — it’s a lot easier to walk in if you already have a good relationship,” says Demopoulos. “More commonly, the consultants will regularly meet and talk with the organization about new trends and opportunities. Being connected is very important, and you need to develop a good interpersonal relationship.”
How to decide
When assessing RFP responses, an employer should look at the value the consultant can bring to the relationship, says Gaffney. Criteria include the consultant’s ability to provide in-depth expertise and insights relevant to industry perspectives, and a strong point of view to help the client address challenges and capture opportunities. Proposals should clarify approach, scope, budget, deliverables, timing and key assumptions.
Siddiqi advises employers to make sure the firm handles companies of their size and has the necessary expertise. “Get to know the organization over a period of time to get an idea of what the people are like before sending out an RFP,” he suggests. “Ask your peers about who they are using, and check references. Do your homework. Changing a consultant is a big task for all involved.”
And cost shouldn’t be the main driver, says Cromwell. She advises plan sponsors to decide if they’re looking for cost savings or better service. “When it comes to cost, most consultants are similar. But customer service levels can vary greatly.”
Baker suggests employers select their top three candidates and ask for presentations showcasing their service, account management and employee communication capabilities. “Those are the true differentiators,” she explains. “You will be well informed on who can best meet the objectives and goals of the organization while containing costs. Organizations get to meet their future team, and that can take away the confusion.”
From old to new
Companies may worry about offending their previous consultant by hiring someone new. And, sometimes, the outgoing advisor is upset enough to cause internal turmoil in the organization by complaining to the president or owner. In companies with multiple locations that have more than one HR and/or benefits manager, the outgoing consultant may have a strong relationship with a decisionmaker at one location and, together, they may try to reverse the decision.
“When notified by the insurance carrier, on occasion, the outgoing consultant may choose to make the transition difficult,” says Baker. “Some reactions are just an emotional response but, usually, they are courteous and respectful because of the industry we represent. We are all industry peers, and we approach these changes with sensitivity — particularly if [the client has] a strong relationship with the previous consultant.”
“I’ve both received and transferred clients and, in my experience, there is usually good co-operation between the outgoing and incoming consultants,” adds Siddiqi. “But there’s a fine line between providing enough information to help with the setup and training the new consultant. It’s a sensitive area.”
While Beech agrees it’s in everyone’s best interests to manage the relationship, she doesn’t believe any discussion with the previous consultant is needed. “We receive a lot of information from the carrier and the client,” she says, noting the process is similar to moving to a new lawyer or doctor. “A lot of information needs to be requested and reviewed when switching consultants. Building a relationship is exciting, but it initially takes additional effort and work because there is limited history.”
While there’s an increasing need for more specialized consulting services and short-term projects, a long-term consulting relationship remains important to employers — and consultants are very aware of the need to provide value.
“Changing consultants is a big deal, as there are costs involved and historical information may be lost,” says Siddiqi, admitting it’s upsetting to lose a client. “You need a real reason to change, because a lot of important information has built up over the years.”
Sonya Felix is a freelancer writer based in Qualicum Beach, B.C.
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