Do I need an Investment Committee?
I often get asked this question and my initial response is always “why not?” An Investment Committee brings structure to your firms Centralised Investment Proposition (CIP) and whilst not a regulatory requirement, it is certainly best practice if you run your own in-house portfolios for clients or a fund panel.
In respect of structure, it is important to establish a ‘Terms of Reference’ for the Investment Committee. These bespoke documents reflect the position of the business and vary according to the range of delegated issues and any delegated powers. Specific reference should be made to the composition, operation, role and responsibilities of the Investment Committee and below are just some points for consideration.
- Composition – ensure membership brings together the various interested parties within your firm and outline the qualification criteria (not in the exam sense). Consider whether independent representation will bring an additional skill set and challenge to the committee. This is especially worth consideration if you are a sole trader practice.
- Operation – how often will meetings be held? What are the decision-making powers of the Investment Committee and who will take the take the minutes, gather, and distribute reports and ensure a record is kept of decisions/actions?
- Role and responsibilities – a statement of principle will help to define the role of the Investment Committee. In respect of responsibilities, these are likely to include the risk mapping of your investment solutions, attrition analysis, an assessment of the portfolio risks (including liquidity, inflation, currency, market and specific) and comparison against relevant benchmarks. Are the portfolios still suitable for your target client segments and do they pass a value assessment?
So, what are some of the key benefits of establishing an Investment Committee?
- It helps to demonstrate that the process to establish and monitor a CIP meets the regulatory test for independence.
- Ensures diversity in membership and thought, bringing challenge.
- Formalises the process of reviewing your CIP and recording decisions agreed upon and actions.
How can we help?
If you would like to discuss setting up an Investment Committee or reviewing your current structure, then please contact me at tdavis@adviserservices.co.uk
