The Dreaded Investment Committee Meeting

Are you interested in being on the Investment Committee for your employer-based retirement plan?  Really?  Or would you rather quit your job?  When I talk with my clients about their investment committee,  I get this look like “Do we really have to do this?”

Well, these don’t have to be an awful experience and they have the potential to serve an important function for any organization wanting to provide a valuable retirement benefit for the staff.  But I think many of these committee meetings emphasize the wrong issues.  Prior to setting up PlanVision and being able to craft these meetings in the way that best benefits smaller firms, I had to sit through a couple of these.  While well run by highly compensated professionals with many designations, they were an inane waste of everyone’s time and money.

These meetings typically included a recap of market forecasts (what just happened) using a bunch of statistics and graphs designed to impress; a forecast that was some wild guess that included a statement similar to “we would expect stability, or possibly some volatility, and market growth of 4 to 6% in the next 9 to 12 months, unless other unanticipated events…”;  and then we would review the performance of the funds and identify the ones that had done well and those that were being “watched.”  (Does this sound familiar to anyone who has been on one of these committees?)  This process was the bulk of the meetings and was designed to showcase the expertise and proprietary skill of the advisers or consultants to justify their fees.

Of course this is nonsense!  I don’t want to have any involvement in a committee that prioritizes this drivel.  Here is what an Investment Committee should cover (in order of importance):

1)  Employee Understanding.  Do the employees understand your plan and are they benefiting from it as much as you want?  Are there new ideas you could try to help more of the staff? This should be the focal point of the meeting, not the last 10 minutes.  And it is a great idea to have rank and file in the meeting and not just management or executive leadership.

2) Industry Trends.  It is important to be aware of any changes brewing in the industry that may affect your plan.   You want to know what might be coming.

3) Plan Structure.  Is there anything with your plan that needs to be changed or altered? Should you go to auto enrollment or escalation?  How is eligibility working?  Review any features of your and how they affect its operation.

4) Vendor Performance.  Are the service providers doing their job?

5) Investment Performance.  Finally we get to this.  Yes, it is wise to review how the investments and markets are performing.  This needs to be done.  But it should be a relatively small component of the session.  Since my clients use mostly index investments, this is a simple process for all involved.

There you go!  These are suggestions – the importance of each topic will vary due to the unique nature of your employer’s workforce and retirement plan.  But focusing on these elements, in this order, should help you run a more interesting and meaningful Investment Committee.



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