By admin on July 4, 2017
Most of our Investment Policy Statements for family clients range from 15-17 pages, depending upon the complexity of each client’s situation. An IPS has key five sections:
Statement of Objectives and Risk Tolerances:
- What is the purpose of the money as well as the quantified goal and timeline? (i.e. we need to have $1 Million saved for retirement purposes in 20 years)
- Will any income be required now (later)? If so, how much?
- What is the investor’s tolerance for risk of both capital and income?
- What are the investment constraints to be considered when managing the money? (i.e. taxes, requirement for short-term liquid funds, unique preferences such as Socially Responsible Investment requirements (for example, no defense/military investments))
Portfolio Construction Guidelines:
- What asset classes (i.e. Stocks, Bonds) and geographies (i.e. Canada, US, International, etc.) will the portfolio be invested in, and how much will the portfolio be allocated to each of these categories?
- How will the portfolio asset classes be rebalanced when market prices shift?
Duties and Responsibilities:
- What are the client’s responsibilities in the relationship? (i.e. providing personal financial updates to adviser)
- What are the responsibilities of the adviser?
- Who will custody/hold the client’s assets to keep them safe?
Portfolio Control Procedures:
- What are the performance objectives and how will they be measured?
- How will the portfolio be monitored to ensure that it continues to meet the standards of the IPS?
- How will the costs associated with managing the portfolio be monitored? (i.e. trading, custody, investment management, etc.)
Investment Policy Review:
- How frequently will the investor and adviser mutually agree to review the IPS?
The IPS should be carefully designed to meet the real needs and objectives of the client.
