This article is presented in collaboration with our partner, UBS.
The family investment committee is a social environment for joint decision-making, prudent investment management and family member development. The investment committee can drive financial literacy, family alignment and development, as well as succession planning. The evolution of the family investment committee plays a role in all of this.
The family investment committee should help evolve and align the family’s practices and be thoughtfully designed. It should include an investment committee charter detailing committee composition, role, authority and discretion.
It also should be informed by the family’s goals and objectives. The investment committee can then be constituted with a cross-section of family members and incorporate an independent investment professional. This independent investment professional enhances the conversation and adds to the experience and learning environment of the committee.
Then there is the drafting of the investment policy statement (IPS) to address risk and return, asset allocation and tax status of the portfolio, to name a few components. The family should take an active role, with some internal and external professionals, in the drafting of the IPS, as it is an educational experience that drives understanding.
The investment committee meetings are where development and alignment happen. Having quality meetings with robust discussion and thoughtful analysis is the goal. This includes discussing information that is shared ahead of the meetings for review. The meetings should include diverse viewpoints from across all attendees. The discussion will have committee members, family office staff, external investment advisers, as well as the third-party managers.
Incorporating a well-functioning investment committee and well-drafted IPS, centered on a collaborative environment, the family will be better prepared to understand where it is going as well as to institutionalize the family’s investment program. The outcomes should also yield a family that is better positioned to be effective financial stewards, collaborate to overcome challenges and seize opportunities.