What is the purpose of an Investment Policy Statement (IPS)?

An Investment Policy Statement (IPS) is essential because it outlines an investor’s financial goals and strategies, acting as a comprehensive guide for both investors and their financial advisors. The IPS captures the investor's risk tolerance, investment objectives, time horizon, and specific constraints such as liquidity needs or tax considerations. By clearly detailing these parameters, the IPS provides a structured framework that helps to ensure that the investment strategy aligns with the investor’s expectations and future aspirations.

This strategic document also facilitates communication between the investor and the advisor, allowing for a mutual understanding of the investment approach and a basis for evaluating performance against the set goals. It serves as a reference point for making informed decisions and adjustments as needed, ensuring that the investment portfolio remains aligned with the investor's objectives over time.