Building a Successful Investment Committee

The standards plan fiduciaries are held to seem to be rising. A critical step in meeting your fiduciary responsibility is to start an investment committee or strengthen your current one. These high-level investment committee basics break down what a successful committee looks like.

Committee Structure

Size: Typical committee size ranges from 3 to 9 members. The larger the retirement plan, the more committee members you’re likely to have.

Diversity: Members with diverse backgrounds are encouraged. At least one member with a background in finance or investments is helpful and diversity in other areas is important for different perspectives. Bringing in an advisor is a requirement when the committee is not equipped with the expertise or time to monitor investments.

Terms: Member terms should be staggered. This allows you to bring on new members with fresh ideas, without losing important history and background for the plan. New members should always receive training to understand their responsibilities.

Charter: A charter should formalize the purpose, structure, roles, responsibilities and authority of the committee.

Identifying Roles

Members: Committees function best when members are engaged. Members should review materials in advance and come prepared with questions and opinions. Personal views on investing may not be appropriate for the assets the committee has responsibility over.

Chair: The committee chair is responsible for maintaining focus. They should ensure there is clarity so members know what decisions have been made, the next steps that need to occur, who needs to take action and by when.

Frequency: Meetings should be held at least once a year. Quarterly or bi-annual meetings can be helpful, especially for plans with over $50 million in assets. If you meet more often, be careful that the group isn’t focusing too much on short-term investment performance. Set meeting dates well in advance.

Agenda: An agenda should be distributed in advance of the meeting. Identify what decisions need to be made and provide any supporting documentation needed to make those decisions.

Minutes: Committees are evaluated on procedure, not outcomes. Document the group discussion, questions raised, considerations reviewed, final decisions and the rationale for them.

Sample Committee Agenda

  • Review any litigation or industry trends that may impact your plan, investments, or process
  • Review the investments in light of the criteria set in the Investment Policy Statement
  • Review participant metrics and participant education
  • Review and benchmark the plan’s overall fees
  • Consider further strategic decisions to achieve the plan’s goals

Investment Committee Building Blocks

  • Conduct periodic fiduciary training (schedule a 1-hour fiduciary training session here)
  • Develop and maintain an Investment Policy Statement
  • Have clear goals for the plan and the investments
  • Meet regularly
  • Document. Document. Document.

Steps for a Successful Committee Meeting

1- Follow the Investment Policy Statement

2- Meet regularly

3- Set and follow an agenda

4- Document minutes and decisions

5- Review materials in advance and be engaged

6- Seek understanding and challenge advisors

So what’s next?

Now that you’ve got your committee together, everyone knows their role, and you’ve scheduled your meetings for the year – check out our investment committee handbook to guide your conversation around:

  • Your role as a fiduciary
  • Protecting yourself and limiting your personal liability
  • Your duty as a fiduciary
  • Your retirement plan’s fees
  • Plan investments