PSNC 2018: The Importance of Educating Investment Committees

Two retirement industry professionals reviewed best practices for investment committee members.

Day two of the PLANSPONSOR National Conference featured a session on investment committee education, the basics surrounding it, and the best resources available to plan sponsors.

Josh Itzoe, partner and managing director of Greenspring Advisors, and Gordon Tewell, principal of Innovest, spoke about what makes an efficient committee. Itzoe noted the importance in keeping an updated roster of committee members, and recommended allocating anywhere from three to seven members for each group. Tewell emphasized diversity in each committee, especially concerning ranks in the workforce.

“Bring in different perspectives in the plan, from different work levels,” he said.

Itzoe agreed, adding, “You want people who are committed, consistent, and are open-minded when considering all the facts and possibilities.”

For those plan sponsors continually catching members skipping out on meetings or unsure of meeting times, Itzoe said scheduling meetings in advance will minimize absences and delays.

“Schedule all the investment committees at the beginning of the year,” he said. “If they can get the whole schedule then they can time it, which is helpful.”

The effects of education and training were touched upon throughout the session. For novice committee members, retirement industry terminology alone can scare them from serving.

“Terms are really hard. As a positive, people will come in enthusiastic, but because the educational content is overpowering, it’s hard to get people” to remain committed, Itzoe said.

While Itzoe stressed the significance behind ongoing education and consistently communicating terms with members, Tewell highlighted the importance of training members on the fiduciary role they’ve gained.

“If we think about training, it’s that more upfront fiduciary focus piece that we need to get someone up to speed and involved in the committee,” he said.

Among key subjects to incorporate in education and training are developing the investment policy statement (IPS), the retirement industry as a whole and prudent fund lineups. An IPS, Itzoe said, is critical when understanding the role investment advisers, and managers, take on. Investment professionals, Itzoe said, can help educate committee members.

“Clients are hiring us to lead a leadership team,” he said. “These companies don’t know what they don’t know, so if you can go in and help them understand not just the what, but the why. If you tell them of the why, people much more embrace it.”

Yet, it’s these committee members responsible for documenting meetings, informing participants and updating their awareness on investments, the Employee Retirement Income Security Act (ERISA) and the latest fiduciary duties. Ultimately, plan sponsors should look to recruit individuals with the capability of handling these tasks, speakers said.