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The Value of an Investment Policy Statement
PLAN SPONSORS ARE typically concerned with two
investment activities: fund selection and fund
evaluation or monitoring. Although it may seem pretty
straightforward, the process used to execute these tasks
can be quite daunting.
Helping
your clients establish procedures for their investment
decision making – and documenting those procedures in a
written Investment Policy Statement (IPS) – is an
important added value that you can bring to the table.
An IPS will help clearly define a plan’s investment
objectives and provide the basis for building a sound
fiduciary process, allowing plan sponsors to:
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Evaluate and monitor the plan’s investments using
well-defined criteria
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Provide
documentation of the decision-making processes with
respect to selecting and monitoring the plan’s
investments
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Ensure
consistency and continuity of process as plan
fiduciaries change
Of course,
the value of this important document is in direct
proportion to its use. A sound investment policy
statement should be a living tool that guides all
investment decisions – from fund selection, evaluation
and monitoring. As you work with your clients to develop
an appropriate IPS, encourage them to refer to it often
and to incorporate it to guide their investment decision
making. In addition, investment policy statements guide
the fund monitoring process, ensuring that measurement
criteria tie back directly to the plan’s goals and
objectives.
Whether
it’s fund selection or fund monitoring, having a map to
guide the plan sponsor serves as a good foundation for a
sound fiduciary process that is consistent and
well-documented from beginning to end.
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