Importance of an IPS

Learn the role and importance of an Investment Policy Statement (IPS).

Joshua P. Preiss, CFA®

Apr. 8th, 2019

A pen
A pen
Importance of an IPS

Hi, this is Josh Preiss the Director of trading at Mersberger Financial Group, here today to discuss the role of an Investment Policy Statement or IPS.

IPS Definition

The Investment Policy Statement summarizes investors’ financial situation and establishes long-run risk and return objectives by combining an investor’s risk tolerance and financial position with their investment time horizon, tax constraints, liquidity needs, and unique circumstances.

IPS Purpose

The objective of an IPS is to outline an investor’s individual needs and build a long run strategic asset allocation suitable for their long-run financial objectives and goals.

An IPS allows for transparency between adviser and investor and communicates to clients the rationale for the adviser’s investment decisions.

Finally, the statement is meant to create a long-run asset allocation designed to meet the investor’s goals. The purpose of this long run allocation is to ensure discipline in times of market turmoil or euphoria and is meant to prevent advisers or clients from acting on emotion and diverging from this long run allocation to chase returns or sell assets during times of market volatility.

I hope this article was helpful and informative and helps you to organize your financial life.

View MFG Investment Policy Statement

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