Does your retirement plan offer a diversified investment menu for your employees? How do you know?
In short, offering a high-quality menu of investments to your employees will help meet their unique needs and different risk profiles. But let's dig deeper.
What steps can you take to ensure a high-quality investment menu?
First, create an investment policy statement.
Would you build a church or a home without a blueprint? I doubt it. Why then do so many faith-based organizations make retirement plan decisions without a formal investment policy statement? It's your plan's blueprint. It outlines your plan's goals and objectives and investment menu options. It defines your plan's investment categories. It guides your decisions as you select, monitor, and adjust your plan's investments.
So do you have an up to date statement? Does your investment advisor offer you examples of effective policy statements to review—ones from other faith-based retirement plans that they've worked with? Get the right help so that you can draft an effective investment policy statement.
The next step is to design your investment menu to align with your investment policy statement.
Make sure it aligns—this is really important. If your investment policy statement, for example, calls for the diversification of fund choices, include different funds from multiple fund families and asset classes in your investment menu. The result will be a diversified menu of investments there to help meet your participant's unique needs and different risk profiles.
Whether your employees are conservative, moderate, or aggressive investors, you can offer an automatic or predetermined portfolio of diversified investments that meet their objectives. Some employees allocate their own accounts. By offering a diversified menu, your employees can include a variety of different funds including growth, balanced, and many others. You also will want to offer target-dated funds and risk-based allocation funds for those employees who want their retirement savings managed professionally.
Including faith-based funds, also distinguishes your plan from a secular one. You help your employees invest in a manner that actually reflects their values. So, do you rely on experts to pick your investment menu? Do you work alongside the experts on the decisions? Or do you do it alone? It's your choice!
By developing a complete and a diversified menu of investments, you will help your employees on their path to a successful retirement.