Forming an Investment Committee
If you read the last article in this series, [Why Consider Setting up An Investment Committee], you may have decided it’s time. Here are a few things to keep in mind when forming an investment committee.
You should…
- Adopt formal committee bylaws (also known as a committee charter) that clearly explain the responsibility of the committee.
In general, the committee has the following responsibilities:
- Meet regularly
- Develop an investment policy statement
- Select and remove or replace investment managements
- Evaluate the managers performance and take appropriate actions when needed
- Monitor the activities of prudent experts and plan providers
- Review investment management fees paid by the plan and participants
- Review procedures for providing financial and operational information to the board (if applicable)
- Appoint an appropriate number of committee members.
Ideally you want five to seven members. (An odd number makes it a whole lot easier when you're voting.) Less than five members and you lack perspective. More than seven and it becomes difficult to get anything done.
- Each member should receive an education or information packet and acknowledge that they've read and understand that they have fiduciary responsibility.
At a minimum, all fiduciaries (including incoming committee member) should be given, and read, material that will help them understand and perform their duties accordingly. This includes (but is not limited to):
- Committee Charter
- DOL Guide, Meeting Your Fiduciary Responsibilities
- Summary Plan Description
- Investment Policy Statement
- Past meeting minutes
This article is just one in a series on Best Practices for Investment Fiduciaries. Click here to access the entire series.
