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An investment policy statement, or "IPS," is a written document that outlines important issues such as goals, policies and procedures as agreed to by both advisor and client for the purpose of managing investments. An IPS is required when a fiduciary relationship exists and is regularly cited as a best practice in wealth management. IPS should change as needed over time.
Set clear and definable expectations, risk tolerance, return objectives and guidelines for investments.
Create a structure and identify the investment asset classes used to achieve a diversified portfolio and determine how those assets are best allocated toward larger goals.
Provide a guide for selecting, monitoring and evaluating the performance of the invested assets and how to appropriately manage changes.
Establish a clear protocol for communicating both processes and objectives among all parties involved, while assigning responsibility for implementation.