The Purpose of an Investment Policy Statement
With a bachelor’s degree in economics and accounting from Ohio’s Capital University, Brian Stertzer serves as managing director at WealthStone, Inc., a Columbus-based investment firm with clients throughout the United States. Brian Stertzer of Hilton Head, South Carolina, was with WealthStone in 2010, when the firm introduced Armada, a multi-advisor investment solution for high-net-worth clients, foundations, and endowments.
Armada uses a universal investment policy statement (IPS) to help clients focus their portfolio. An IPS is a formal document, signed by both investor and advisor, customized to the needs of the client. The IPS clearly defines the direction of the client’s investments, while also providing maximum accountability for advisors working with the account.
The IPS defines the roles of each partner in the investment process and sets up realistic expectations for the client with regard to market risk and return. The statement considers a time horizon as part of the market risk calculation. Additionally, the IPS allows for constraints such as liquidity and tax considerations to be placed on the portfolio, depending on the client’s financial needs. These customization options and accountability safeguards aim to better serve the client by personalizing the investment plan.
