Workplace retirement plans, such as a 401(k) or pension plan, often have a lengthy list of rules and regulations. An investment committee often determines how to manage those retirement plans. Learn the role and investment committee plays in retirement and investment planning.
What Is an Investment Committee?
An investment committee governs and oversees an investment plan or strategy. Sponsored retirement plans may need an investment committee. However, their influence stretches beyond retirement plans. For example, a corporation may appoint a committee to oversee company investments.
The members of an investment committee can be drawn from the company’s board of directors. The committee may work with the company’s Chief Investment Officer to shape investment policy. However, with qualified retirement plan or pension plan, the plan sponsor may draft a charter detailing committee selection. Meanwhile, it may address the number of people who can serve on the committee at any given time.
Members of an investment committee may not require financial or investment expertise. The size of the committee can vary greatly. For example, some require just a handful of members. Others have dozens. However, investment committees must choose members dedicated to investment oversight.Investment Committee Duties
The members of an investment committee have certain responsibilities and duties they’re expected to carry out. Those duties include:
Members of an investment committee may have additional duties. However, it depends on how the committee is structured. But these four responsibilities are at the core of the committee’s work. It protects the interests of those who participate in an investment plan.Why Is an Investment Committee Important?
Investment committees do different things but it all comes back to one thing: helping the plan achieve its investment objectives. Having an investment committee to support the CIO of a company or a retirement plan sponsor is like having a fresh set of eyes to offer perspective.
The investment committee’s job is to take an objective look at what the plan or investment company is trying to do and help build a strategy to support it. Essentially, having a committee creates a system of checks and balances that are designed to promote responsible investing.Investment Committee Best Practices
When it comes to carrying out its duties, there are certain do’s (and don’ts) that can make an investment committee successful. With no universal standards for such committees in place, professionals recommend these best actions:
Again, they can set flexible guidelines. But those rules can be useful to companies and plan sponsors for setting appropriate boundaries and expectations when establishing an investment committee.The Bottom Line
An investment committee provides support for plan sponsors and investment companies. Members take on certain responsibilities to help create a sound investment strategy. That’s reassuring both for the companies and individual investors whose investment plans rely on them.Investment Tips
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