Investment policy statement

An investment policy statement (IPS) is the family’s own rulebook for its investments, written before any bank is chosen and handed to every bank and manager afterwards. It turns preferences that usually live in conversations into a short document against which each mandate, each report and each new proposal can be checked.

How an investment policy statement works

The IPS belongs to the family, not to a bank. It is drafted once, approved by whoever holds decision rights, and attached to every mandate as the reference the manager must respect. Each bank keeps its own risk questionnaire and house models; the IPS sits above them. When one bank reports a strong year and another a weak one, the IPS says which benchmark both should have been measured against. When a banker proposes a new product, the IPS says whether it fits. Reviews happen on a fixed calendar and after any material change: a sale, a move, a death, a new generation joining decisions.

What is included in an investment policy statement?

An investment policy statement sets out the family’s objectives, return expectations and time horizon; risk tolerance and maximum acceptable loss; liquidity needs and cash reserves; target allocation with ranges; constraints such as exclusions, concentration limits and currencies; benchmarks per mandate; who decides what; and the reporting and review calendar.

Where it breaks without one

Banks do not ask for an IPS because their own questionnaire already gives them the room they need. For families with several million to tens of millions across several banks, the result is a set of discretionary mandates that each look reasonable and together form a portfolio nobody chose. In a founder with four banks and no single view, a written target allocation was what finally let the two discretionary banks be measured against one benchmark and against each other. It is also one of the first documents in the minimum viable family office, and the reference that makes portfolio management by others reviewable.

Keep it short: a few pages that every banker reads beats a long document none of them does.

PWA designs and runs the operating layer around private wealth: we draft the IPS with the family and use it to oversee the banks under Investment & Wealth Architecture. PWA does not manage money, hold mandates, take commissions or give regulated investment, tax or legal advice. To see how your current mandates compare against the rules you would write, start with a written second opinion.

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This entry is part of PWA’s plain-language glossary of terms used in modern family office architecture.