Investment Policy & Portfolio Design
Building an Investment Policy Statement for Multi-Generational Wealth
A practical blueprint for creating an IPS that defines risk limits, liquidity rules, and rebalancing triggers before market stress hits.
Strategic Takeaway
A documented policy reduces emotional decisions and creates accountability across advisors and family stakeholders.
Start with Objectives, Not Products
Strong IPS documents begin with return goals, risk tolerance, liquidity needs, and decision rights. Asset selection comes after governance is clear.
- Define required return after taxes and fees
- Set a maximum acceptable drawdown
- Map spending obligations by time horizon
Separate Strategic and Tactical Decisions
Strategic allocation should change infrequently. Tactical shifts need pre-defined guardrails so the portfolio does not become a reaction function to headlines.
- Set review cadence quarterly, not daily
- Use rebalancing bands rather than ad-hoc trades
- Document who approves exceptions
Build an Escalation Framework
When markets dislocate, speed matters. Your IPS should specify triggers, communication paths, and temporary authority so decisions happen quickly and consistently.
Frequently Asked Questions
How often should an IPS be updated?
Most families review annually and update only when objectives, liquidity needs, or governance structure materially change.
Does an IPS prevent losses?
No. It helps control behavior and risk-taking during losses, which improves long-term decision quality.
Who should sign the IPS?
The primary decision-makers, advisory lead, and where relevant trustees or family governance representatives.