Do you have effective control mechanisms in place that identify, and reduce, risks to clients?

Firms need to be able to show how they are proactively monitoring and managing risks, and whether this is leading to suitable outcomes. As such, ICs are an important control for any firm operating a centralised investment proposition and ensuring the house view is promoted.

The IC's fundamental responsibility is:

  • To provide a frame of reference for suitable investments and their oversight.
  • Setting of an investment policy, objectives and limits; then
  • Reviewing performance and compliance.
  • Create a clear set of key performance indicators enables progress to be measured.
  • Judging progress over time is part of the committee’s remit,
  • Recommending and approving policy changes,
  • Has this been cascaded to the relevant stakeholders?

What about the structure of an investment committee?

A typical investment committee often comprises:

  • Investment managers (i.e. those individuals performing adviser function, responsible for managing client portfolios);
  • Investment advisers;
  • Chairman;
  • Those with significant influence functions/compliance oversight (i.e. SMF16);
  • Any individuals responsible for investment research.

They should demonstrate the focus will always be on producing good customer outcomes.

To ensure there is no confusion about the responsibilities of the investment committee, it should be given clear terms of reference which define its purpose, scope, structure and outputs.

What are the operational conditions for the above?

A good investment committee will have the following attributes:

  • An explicit understanding of a portfolio’s purpose and objective – client outcomes should be the driver for decision making and portfolios should be designed with the target audience in mind.
  • A clear definition of what success looks like for the portfolio.
  • A clearly defined investment strategy house view based on reasonable assumptions around expected returns and exposures to risk.
  • A straightforward and clearly defined process for selecting investments for addition or removal from the portfolio.
  • CIP is designed to be a standardised approach, there should be a structured and repeatable process for selecting underlying investments to demonstrate a consistent approach to decision making.
  • A culture and structure where diversity of experience and opinion is encouraged, do they include ESG?
  • A commitment to follow the processes set. A committee’s terms of reference and investment policy statement are only part of suitable systems and controls if the committee operates within the boundaries it has set itself.

At Signature, we can act as an additional control, providing an opportunity for independent challenge and input.

We have a wealth of experience in this area:

  • As part of SimplyBiz, we run our own Investment Committee. We pool together our own in-house expertise for this, as well as some of the best talent in the industry – see more >
  • We have a number of experts in this field within our regulatory centres of excellence on-hand to work with firms on governance and oversight of an Investment Committee.
Senior Managers & Certification Regime
What is Signature
DIM Solutions
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