Securities Lending: The RFP is your friend, not your enemy

Updated: Oct 6

From the desk of John Arnesen,

Consulting Lead, Pierpoint Financial


Have you ever had the following happen to you? It's a balmy summer's Friday evening after a long week at work approaching 6 pm. Your colleagues have already secured an outside table at a preferred wateringhole when you receive an email. The gist of the mail concerns a securities lending section in a Request For Proposal (RFP) that is primarily centred on global custody but includes several value-added services of which agency lending is one. The RFP team has populated the responses, and ask if you could look it over? Oh, and by the way, the final version will be delivered on the following Tuesday before noon, electronically. In scanning the responses, wondering why securities lending was not invited to the initial RFP preparation kick-off meeting, hoping against hope that it hasn't happened, there it is staring you in the face. A lengthy answer to a question that has been cut and pasted from a previous RFP that refers to another institution.

RFPs are a critical part of the securities lending process and needs dedication

The RFP is an exciting document to receive. It means that a potential new client or their consultant wants to know more about your capabilities with a view to your firm providing them one or several of your services. It is safe to assume that they have some familiarity with your organisation, now want greater detail and given that securities lending is included as a service, the excitement should be hard to contain. Right?


The reality might be somewhat different. The size and complexity of the questions may alarm those responsible for its preparation, depending on how they are structured. Most banks will have a dedicated 'RFP team' which may be too busy with the sheer volume of work, under-resourced, or worse, both. I argue that not to resource this team appropriately with seasoned staff that can understand the questions asked and know the appropriate responses is to do one's institution and the prospective client a disservice.


All RFP teams maintain a database of answers that they use to populate questions. This is reasonable given that product lines do not change their operating methodologies that particularly frequently and it is efficient for the FRP team to draw up the first draft in this way.


However, before reaching this stage, better quality institutions will typically do the following.

Before accepting the invitation to respond to an RFP, a senior deal team will meet to determine whether the potential client is one they can service and, meets their strategic goals. An analysis of the current onboarding schedule of new business and any other developments that could hinder the firm's ability to service the prospective client should be conducted. Brutal honesty at this stage is how successful organisation retain integrity with consultants and with the prospective client. Turning down business should not be considered a slight nor prohibit a future relationship. Sadly, the tendency to say yes to everything that comes your way is prevalent because of the perception that turning business away is always a wrong move. It isn't.


If the decision is to go ahead, then the deal team referenced should consist of a representative of each product area that will be responding and importantly, the deal-team sponsor should be a very senior individual, even the CEO. While that may seem impractical, I have sat on RFP deal-teams where this happened, and it not only kept all the members on their toes and to sticking to deadlines, but encouraged us that the process was receiving such attention. When you think about it, this shouldn't be so odd. If anyone has a vested interest in new business, it is the CEO, and their participation in the process that may end in face-to-face meetings sends a message to the prospective client that no one else can.


I have heard from colleagues in the past that RFPs are awful things and are the worst way for a client to understand the capabilities of your firm. They don't allow for demonstrations of systems the prospect may use, and it’s almost impossible to describe them in writing. On more than one occasion, I have heard 'that's the wrong question!' screamed in frustration, and I have been guilty of similar outbursts. What is actually happening is that you want to respond in glowing terms about a feature in which your firm excels, but none of the questions affords you the opportunity.


Complaining about the RFP process is a bit like shouting at the moon. Until a disruptive technology changes the process radically, it is here to stay in its current form. Many companies use them as a preferable way to do business, and for governments, it is usually the only way. RFPs are structured to allow all participants to respond to identical, tightly structured questions that enable the prospective clients or, more often than not, their appointed consultants to collate responses and score them using their proprietary methodology. Waffling in your answers, capitalising words inappropriately, repeating verbatim your operating procedures, exceeding the word count (where there is a restriction) and not concisely answering the question is how institutions lose potential business. During a debrief, you may never know the reasons you lost as prospective clients are human too and tend to be kind with bad news.


Poorly worded RFP responses tell clients more about your institution than you would care for them to know. Unintentionally, the opportunity to showcase your institution and its prowess is wasted by sloppy, rushed or badly spelt responses. A client reading such an RFP is likely to ponder that if they can't be bothered to get this right, how would they service me as a client?


Some years ago an RFP requested that the return submission be hand-delivered at a precise time in an envelope for which they gave exact dimensions, and addressed to an individual, their department and floor. The RFP also warned that if any of the instructions were not followed, the candidate would be excluded from consideration. If this sounds pedantic, imagine the scrutiny given to the responses?


At Pierpoint, we have had many experiences with RFPs. If you are thinking of issuing one or want an independent review of your responses, give us a call.


#rfp #securitiesfinance #ceo #dealteams #disruptivetechnology #governments

Image by Miltiadis Fragkidis

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