Most boards appointed their investment consultant or OCIO years ago. The decision was made at a particular point in time, for a particular portfolio size and complexity, and often through a relationship or referral rather than a structured evaluation. The arrangement has continued since then, sometimes for a decade or more, without a formal review of whether it remains the right fit.
In many cases the arrangement continues to serve the board well. But governance best practice calls for periodic evaluation, regardless of whether problems are apparent. The question is not whether the arrangement is failing. It is whether the board has a framework for confirming it is still the right fit — and for running a sound process if a change is warranted.
This guide provides that framework. It is designed for boards that work with an investment consultant or OCIO provider — an investment partner responsible for advising on or implementing the board's investment strategy. It is not a guide to selecting underlying fund managers. That is a different decision, often delegated to your investment consultant or OCIO as part of their mandate.
Our companion guide, What Your Adviser's Business Model Tells You About Their Advice →, maps the six advisory models and what each one incentivises. This guide assumes you understand what model you are in. The question here is whether the specific provider within that model is delivering what your board needs.
In This Guide
Public preview: Why performance is a poor starting point for evaluation. The five dimensions of a strong advisory relationship — named, with a single diagnostic question for each. When to review, and what should trigger an immediate conversation.
Full guide (available on request): The complete five-dimension evaluation framework with detailed questions and scoring guidance. A structured approach to running a selection process. Guidance on working with specialist search consultants. A monitoring framework for ongoing oversight. Reporting expectations. A board-level assessment template designed to be completed annually by the investment committee.
The Performance Trap
One of the most consequential decisions a board makes about evaluating its investment consultant is where to start. Many boards start with performance. Returns are visible, comparable, and emotionally compelling. An investment consultant who has delivered strong returns feels difficult to question. One whose recent performance has been disappointing feels easy to blame.
Both instincts are misleading.
Short-term performance tells you very little about the quality of an advisory relationship. Strong returns can come from luck, from excessive risk-taking, or from a market environment that happened to favour a particular style. Disappointing returns can come from a disciplined process that will serve the portfolio well over the full cycle.
The question a board should ask is not "how has the portfolio performed?" but "is the investment process sound, and is the governance relationship working?" Performance is one input into that assessment. It is not the assessment itself.
This matters practically because boards that evaluate primarily on performance tend to make poor selection decisions. They appoint after a strong run, buying into performance that may not persist, and replace after a weak period, exiting a process that may be about to recover. The evidence on this pattern is consistent: institutional investors who change providers based on recent performance tend to underperform those who maintain a disciplined, process-focused evaluation.
Five Dimensions of a Strong Advisory Relationship
If performance is a poor starting point, what should a board evaluate? We believe the answer is the quality of five things: process, alignment, governance support, transparency, and fit. Together, these five dimensions provide a structured framework for assessing any advisory relationship — whether your board works with an investment consultant, a discretionary manager, or an OCIO provider.
The table below names each dimension and offers a single diagnostic question. These five questions are enough to start a productive governance conversation. The full guide provides the complete framework: detailed questions for each dimension, scoring guidance, and a board-level assessment template.
| Dimension | What It Means | The Question to Start With |
| Investment process | Is there a repeatable, documented process — and is it being followed? | Can your investment consultant explain their investment process in terms the board can understand? |
| Alignment | Do the incentives point in the same direction as your interests? | Can your investment consultant produce a single document showing every source of revenue they earn from your mandate? |
| Governance support | Does the relationship make your governance easier, not harder? | Does your investment consultant proactively raise governance issues, or only respond to what the board asks? |
| Transparency | Does the board get honest communication, not just disclosure? | When something goes wrong, how quickly and directly does your investment consultant tell you? |
| Fit | Does the service model match your governance reality? | Is the service model designed for institutional clients, or adapted from a different client base? |
If these questions are straightforward to answer, that is a good sign. If any of them give the board pause — or if committee members would answer them differently — that is worth exploring further.
When to Review
A well-governed board reviews its advisory arrangement on two tracks: periodically, as standard governance practice, and when triggered by specific events.
Periodic review does not have to be a full selection process. It can be a structured conversation at the investment committee level, working through the five evaluation dimensions and assessing whether the current arrangement still scores well on each. A review every three to five years is reasonable. The value of making it periodic is that it normalises the conversation. A board that reviews its advisory arrangement regularly is less likely to defer the conversation until a crisis forces it.
There is a separate set of circumstances that should prompt an immediate review, regardless of where the board sits in its periodic cycle.
Event-driven triggers include:
- Sustained underperformance relative to the mandate's objectives — not relative to a benchmark over a single quarter, but relative to the long-term return and risk parameters the board has set
- A key person departure from the advisory firm, particularly where the relationship depends on a specific individual
- A significant change in the board's own circumstances: a step change in portfolio size, new asset classes, new governance requirements, or a change in the institution's objectives
- Regulatory developments that change the governance landscape
- A governance review or audit that identifies gaps in the investment function
- A realisation that the five questions in this guide are harder to answer than they should be
The best time to evaluate your investment partner is when things are going well and the conversation can be rational. The worst trigger for a review is a crisis. Boards that wait until something goes wrong tend to make hasty, emotionally driven decisions about their advisory arrangement.
Full Guide
Continue Reading
This is the public preview of our guide on selecting and monitoring your investment partner. The full guide includes the complete five-dimension evaluation framework, a structured selection process, guidance on working with specialist search consultants, a monitoring framework, reporting expectations, and a board-level assessment template.
We're happy to discuss how this framework applies to your organisation. We also work alongside independent specialist search consultants and can make an introduction if your board is considering a formal review process. Contact us at institutional@shawandpartners.co.nz.
