Broker Check

Forming An Investment Committee Part 2

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…

  1. 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)
  2. 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.
  3. 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.


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