Best Practices for Investment Committees

Many advisors that have broken away from the big wirehouses and banks typically relied on, and were guided by, their firm’s economists, strategists and research departments. But these independent advisors now have the opportunity to establish their own investment committees.

investment committees

“We established our investment committee in order to hold ourselves accountable to an investment discipline and process,” said Jerry West, chief investment officer of Archford Capital in St. Louis. Indeed, many RIAs cite this same need as their motivation for launching their own investment committee.

RIAs in the Dynasty network have cited the following reasons for the creation of investment committees:

  • Communicating to clients and prospects that the firm has a disciplined approach to investing
  • Signaling to regulators that the firm has a defined process for investment decisions
  • Professionalizing the firm
  • Encouraging diversified thought and intellectual debate
  • Institutionalizing the investment process across all advisors in the firm
  • Using the committee as a powerful marketing tool

Tom Greco, chairman of the Philadelphia-based Concentus Wealth Management’s investment committee, believes it is extremely important that every investment committee has a written charter that clearly states the objectives of it, how often it meets and how decisions are implemented. But be careful. According to Scott Welch, chief investment officer of Dynasty Financial Partners, it is important that you adhere to everything you commit to in your investment committee charter. “While the regulators don’t require the establishment of investment committees, it can be very helpful in an audit, providing you do what you say you’re going to do. If you aren’t sure, then don’t commit to it in writing.

Read rest of the article here