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  • Fort Walton Beach, FL 32548
  • (850) 244-5151 ext. 1124

Advice for Life

Investment Policy Statement

How would you like your fees and performance expectations fully communicated to you when meeting with an investment advisor? Would you like to know how your portfolio would be measured, whether through asset allocation, level of risk, income needs or tax preference to name a few? Would it not be great, to have all of this information in a well-defined document, which will provide you with a quick reference for adherence to the agreed upon terms? It is amazing how many advisors do not use this, or rather that clients don’t demand this, when starting out a relationship. 

An Investment Policy Statement ("IPS") is a document between an investor and asset manager. The IPS records the agreements between the two parties regarding issues related to money management and future decision-making consistent with the policy. It can be seen as a directive from the client to the investment manager about how the money is to be managed, but at the same time the IPS should provide the guidelines for all investment decisions and responsibilities of each party. Both the manager and the client sign the document, indicating acknowledgment of, and agreement to, its several parts. This can serve to protect both parties in the event of a future disagreement, as long as they have respectively adhered to the content of the IPS. 

The presence of an IPS helps to create an environment of transparency in the relationship between client and advisor. The IPS offers clients a better understanding of what to expect from their advisor and helps build a much higher level of trust and respect. Use of an IPS with each investment client is now considered a best practice for investment managers and should be expected by clients hiring a professional investment manager.