Ten Common Pitfalls

For Purpose

Most investment committees make the same mistakes

Not because their members are careless. Because the conditions that produce those mistakes are structural and almost universal: scarce meeting time, uneven expertise, a full agenda before the investment report arrives. The adviser presents, the committee listens, and a decision is made, sometimes with confidence, often with an uncertainty that nobody voices.

The ten patterns described in this guide have been observed consistently across NFP investment committees operating under real constraints. Each is correctable. Most are avoidable if the right structures are in place. None of them require the board to become investment experts. All of them require the board to govern actively.

Two themes run through almost every pitfall

The first is the Investment Policy Statement. An IPS that the board has actively shaped and genuinely owns is the foundation of effective investment governance. One that lives in a filing cabinet, or was prepared by the adviser and adopted without meaningful board input, is not a governance tool; it is a compliance artefact.

The second is mandate clarity. The boundary between what the adviser is authorised to do without approval and what requires board or investment committee sign-off is one of the most consequential governance decisions a committee makes, and one of the least discussed. Where those two elements are sound, the ten pitfalls described here can be mitigated. Where they are absent or poorly designed, they become almost inevitable.

Operating without a genuine IPS

What distinguishes a working governance document from a compliance artefact, and how to rebuild one with the board as author.
An IPS disconnected from mission

Why return objectives must be grounded in program commitments and distribution requirements, not market convention.
A mandate without clear authority

How to define what the adviser may do without approval and what requires committee sign-off.
Confusing approval with oversight

Why receiving and approving a recommendation at the same meeting is not governance, and what genuine oversight requires.
An IPS that becomes a historical document

The discipline of annual formal review and re-adoption.
Benchmarking without measuring what matters

Tracking distribution capacity and real capital preservation alongside conventional benchmarks.
Accepting the endowment model without evaluating fit

The structural reasons why alternatives allocations that serve large endowments often do not serve smaller NFP corpora.
Failing to model franking credits

Why tax-exempt entities should quantify the franking credit advantage explicitly in distribution planning.
Treating governance as a quarterly event

Defining the out-of-cycle triggers that make governance a continuous structure rather than a periodic ritual.
Never formally reviewing the adviser relationship

The six dimensions of an annual adviser review, and why the outcome should be documented and shared with the adviser.

Ten Common Pitfalls of NFP Investment Committees

Most investment committees make the same mistakes

Two themes run through almost every pitfall

What the guide covers

Request Ten Common Pitfalls of NFP Investment Committees

Part of the Wealth and Legacy in Motion series

Wealth and Legacy in Motion

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