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Tips for Building an Investment Committee

Knowing, and fulfilling, fiduciary duties are critical to effective plan administration, and their importance will not be lessening. A recent blog post suggests that investment committees can be helpful in meeting those responsibilities and offers tips on building or strengthening one. 

In “Building a Successful Investment Committee,” ConradSiegel offers ideas on establishing a successful investment committee. 

Structure

Regarding structure, the authors:

  • note that an investment committee usually has between three and nine members, and that the size of the committee tends to correspond to the size of the plan;
  • suggest that the members have diverse backgrounds and that at least one have a background in finance or investments;
  • remind that it is necessary to have an advisor as part of the committee if the rest of the committee is not equipped to monitor investments;
  • suggest staggering the committee members’ terms so as to refresh the committee with new ideas while retaining history and accumulated knowledge;
  • advocate training new committee members; and 
  • suggest that a charter for the committee should make its purpose, structure, roles, duties and authority formal. 

Roles

The authors suggest that committee members:

  • review materials; 
  • come to meetings with questions and opinions;
  • be capable of separating their personal opinions and their views on plan asset investments; and 
  • be engaged.

They also suggest that the committee chair maintain focus and clarity regarding the committee’s direction, decisions and actions. 

Committee Meetings

ConradSiegel suggests that meetings be held at least once a year, and notes that quarterly or biannual meetings can be helpful. The authors caution that meeting more frequently poses the risk of focusing too heavily on the short term. 

They also advise setting meeting dates well in advance and distributing an agenda, that defines decisions to be made and provides supporting documentation, before the meeting is held. 

And, they add, meetings should be documented in detail: discussion, questions and considerations, as well as final decisions and the rationale behind them.

The Broad View

The authors suggest developing and maintaining an investment policy statement. And they remind that the committee should have clear goals for the plan and its investments.