Investment Policy Statement

An Investment Policy Statement (IPS) is a written document crafted for a specific investor which outlines all of the most important issues, including goals, policies and procedures as agreed to by both advisor and client for the purpose of managing the client’s investments. An IPS is required when a fiduciary relationship exists and is regularly cited as a best practice in the modern wealth management practice.

Whether an investor is an individual, employee benefit plan, endowment, foundation or trust, an IPS serves several important purposes in the relationship between financial advisor and investor. An Investment Policy Statement should clearly state the investor’s goals while also establishing the investment management procedures. As such, the IPS provides the foundation for all future investment decisions the manager will make on the investor’s behalf. In turn, it also serves as a guidepost for the investment decision-makers, creating a system and a discipline for all future investment decisions.

Using a properly composed Investment Policy Statement should bring the following benefits:

• An IPS compels the investor and the investor’s advisor to be more disciplined and systematic in their decision making, which in itself should improve the odds of meeting the investment goals.
• Objectives and expectations are clear for all concerned parties and thus, misunderstandings are more likely to be avoided.
• Approved procedures are specified so everyone concerned will know what to expect.
• Decisions can be made as to how things will be done under a variety of circumstances in a deliberate fashion, rather than in reaction to emotions.
  The Investment Policy Statement establishes a record of decisions and an objective means to test whether those serving the investor are complying with the investor’s requirements.
• The IPS provides a ready means to communicate to advisors, beneficiaries, and current and future fiduciaries how the investor proposes to go about acting upon his/her/their duties.