Kevin Swanson in U.S. News & World Report: What Is an Investment Policy Statement?
In the world of wealth management, one way advisors can help their client families pursue long-term financial wellbeing is by using something called an investment policy statement. Simply put, an investment policy statement is a document that details how the family’s money will be managed for the long term – but it’s not as simple as it may sound.
To learn more about investment policy statements and how they can be utilized to plan a legacy for generations, U.S. News & World Report turned to Potentia Wealth CEO, Private Wealth Advisor and LPL Registered Principal Kevin Swanson for insight.
According to Swanson, an investment policy statement should go beyond simple financial planning by explaining how the family came into wealth and how to shepherd it. “It’s a unique opportunity to come together to shape the family’s future and to create a value statement about how they would like their wealth to impact the lives of their family and the world,” Swanson says.
Only after Swanson understands the family’s financial goals and objectives does he begin to incorporate investment management objectives into the plan. This includes the amount of risk the investment manager should take, expected returns, time frame and whether the family wants to invest according to religious beliefs or socially responsible causes.
Some other aspects Swanson recommends families include in their statements include provisions for future generations, interest in tax-efficiency, how the portfolio is managed, frequency of performance updates and a section on the process of removing investment managers if they ever become unhappy with the performance.