The investment policy statement: roadmap to success

It's important to determine exactly what money means to you

Suppose you were about to embark on a trip. Let’s imagine that you know where you want to go, but you are not really sure how to get there. What are your options?

One is to hop in the car and go … wing it. Ask for directions along the way. Sooner or later you might arrive at your destination. It might take longer. And it would most likely cost more. But it would be an adventure. It might even be fun … at least for awhile.

Another option is to study maps and determine in advance the most efficient route, then formulate a detailed travel plan. Follow the plan diligently, and don’t get sidetracked.

This approach may not sound as exciting. But of the two options, it is the more likely to succeed. And in the end, chances are it would be a lot less stressful.

Unfortunately many of us go through life “winging it” with our finances, often not knowing where it is we are headed, or how to get there.

What does money mean to you? And what do you expect money to do for you? Or, what do you expect it to do for your children, or your grandchildren?

Ideally you should know the answers to these questions.

Perhaps more importantly, your financial advisor should know the answers to these questions. Your attitudes towards money can assist him or her in understanding your values, as well as your expectations.

Ethical considerations are also important to a growing number of investors who are determined to “walk the talk” and are opposed to investing in companies who are not good corporate citizens. Your advisor should understand and respect your views on such matters.

A popular tool for identifying and documenting these and other important considerations is the Investment Policy Statement.

As the cornerstone of your wealth plan, the Investment Policy Statement (IPS) documents the following:




• Your liquidity requirements: short-term needs for cash

• Your income requirements

• Taxation considerations

• Time horizon: when will you need your money

• Your risk tolerance

• Your attitudes towards investing

• Your values




Based on these considerations, your Investment Policy Statement then provides detailed guidelines that will serve to govern the management of your investment accounts.

An asset mix is determined, and protocols are established that will mandate the manner in which your accounts will be monitored and adjusted going forward.

The IPS should also clearly identify the fees you will pay, as well as how you will pay them.

In addition to promoting communication and understanding, the IPS details the responsibilities of all parties involved in the management of your money, and holds all parties accountable.





Jim Grant, CFP (Certified Financial Planner) is an Investment Funds Advisor with Raymond James Ltd (RJL). The views of the author do not necessarily reflect those of RJL. This article is for information only.  Securities are offered through Raymond James Ltd., member CIPF.  Financial planning and insurance are offered through Raymond James Financial Planning Ltd., which is not a member CIPF. For more information feel free to call Jim at 250-594-1100, or email at and/or visit



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