Benefits of Using an IPS

Investment Policy Statements Defined

An Investment Policy Statement 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 Investment Policy Statement is required when a fiduciary relationship exists and is regularly cited as a best practice in modern wealth management.

By creating an Investment Policy Statement, you’ve established a plan to confront complex issues and identified a systematic discipline for decision-making. In doing so, you’ll have the advantage of clarity with your clients regarding their expectations and goals. Your clients will better understand what to expect in the advisory relationship and you’ll be better prepared to meet their needs.

The role of the Investment Policy Statement

With an Investment Policy Statement, both the advisor and client can make prudent, rational decisions about investments with confidence.

1. Setting Objectives – Set clear and definable expectations, risk tolerance, return objectives and guidelines for investments.

2. Defining the Asset Allocation Policy – 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.

3. Management Procedures – Provide a guide for selecting, monitoring and evaluating the performance of the invested assets and how to appropriately manage changes.

4. Communication Procedures – Establish a clear protocol for communicating both processes and objectives among all parties involved, while assigning responsibility for implementation.

The typical investor often makes inappropriate decisions due to a lack of information and a non-systematic approach. Emotional or behavioral factors can also lead to improper decision-making. By using an Investment Policy Statement, investors have a written document to make prudent and rational decisions.

Distinguish your practice

Using an Investment Policy Statement in your client engagement process will help you establish a competitive edge.

Among the tools included with IPS AdvisorPro® is a discussion guide and questionnaire that can be used with clients during the information gathering stage of creating an Investment Policy Statements. With IPS AdvisorPro®, you’ll know that you have all the details needed to create the perfect Investment Policy Statement for your clients every time.

Better Client Relationships

Using an Investment Policy Statement provides a clear outline for process and results – allowing advisors to acknowledge the goals and expectations of their clients.

1. Your client gets what is expected. Clients always have some idea of what they want from a financial advisor and while you can help align that idea with their needs, you must satisfy their expectations for the relationship to last.

2. Your client understands and is pleased with the various aspects of the engagement. Clients should understand the work you are doing on their behalf, the benefit they may realize and that you are always working with their best interests in mind.

3. Your client accepts and implements advice. Clients, who resist taking advice, or even those who do so reluctantly, are signaling that you are giving them something other than what they expected or that they do not understand your recommendations.

4. The relationship is profitable and beneficial for both advisor and client. Successful relationships often boil down to both parties enjoying the work, the problem solving and the results that stem from a partnership where everyone’s expectations and goals are addressed.

Working with your client to build an effective Investment Policy Statement often helps with all of the important aspects listed above. Your use of an Investment Policy Statement establishes a place where an advisor can clearly state a client’s goals and expectations, and provide the type of consistency in process, recommendations and decision-making that encourages clients to have confidence in and accept the advisor’s actions.

Save Time and Money

Building an Investment Policy Statement without IPS AdvisorPro® is often a drain on an advisor’s time or can lead to expensive outside consultants. Word document Investment Policy Statements can also lead to easily overlooked errors or missed client issues. This never happens with IPS AdvisorPro®.

IPS AdvisorPro® incorporates valuable tools for measuring risk tolerance and defining asset allocations so that you don’t have to use multiple systems to create the right fit for your practice. Simply stated, IPS AdvisorPro® was designed to be the out of the box Investment Policy Statement solution for the modern wealth manager.

Who needs an Investment Policy Statement?

In short, every investor needs an investment policy statement. In certain fiduciary circumstances, law mandates it’s use.

An investment policy statement is required anytime a person or group is making investment decisions for the benefit of others, regardless of whether the decision-makers also have a direct personal interest in the assets.

Anyone affiliated with a broker-dealer should talk with his or her Compliance Department about what they require as approved wording in Investment Policy Statements. IPS AdvisorPro® can be easily tailored to produce a compliance approved document.

Professional Investment Policy Statements

Stop using those outdated word documents or other applications that don't reflect how YOU manage money and move up to IPS AdvisorPro® created by Advisors For Advisors.
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Take A Guided Tour

Our online video shows how to easily create an investment policy statement in five simple steps: create a new client, view the questionnaire, choose an asset allocation model, generate and edit the final wording.
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