On the Same Page

Financial Planning

By Ingrid Case

January 1, 2009

Investment policy statements (IPSs), viewed as protective by some advisors and potentially hazardous by others, are getting more attention in this transformed market. An IPS is a document that explicitly outlines the goals and philosophy of investing for a given client, setting general preferences.

Users regard IPSs as an effective tool for keeping planners and clients on the same page, guiding the planner's efforts and keeping the client's expectations reasonable and realistic. "Whenever you have a really good market, people don't tend to look at the details," says Blaine Aikin, chief executive officer of fi360, a financial services consulting firm near Pittsburgh that provides planners with a web-based tool that generates IPSs.

While advocates stress the advantages of having a document on hand to remind the client of what they bought into, critics believe that IPSs can cause as many problems as they might solve. "I worried that keeping up with the requirements set out in an IPS for hundreds of accounts would be a liability issue," says Randy Ruggaard, president of Ruggaard & Associates in Twinsburg, Ohio.

Today's IPS will likely be a recovery plan for many clients, a blueprint for how you and your clients will reexamine goals and attempt to make up for losses.Ingrid Case is a Minneapolis-based freelance writer.

Ingrid Case is a Minneapolis-based freelance writer.

Dave says: I write IPS for 401(k)s.