From the course: Portfolio Management for Retail Clients

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Drafting an investment policy statement (IPS) - Part 2

Drafting an investment policy statement (IPS) - Part 2

From the course: Portfolio Management for Retail Clients

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Drafting an investment policy statement (IPS) - Part 2

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Now, we talked a bit about the strategic and tactical asset weights that were determined for the Pritchetts, but how did we arrive at those numbers? Well, this is one part of the client discovery and onboarding process that is more an art and less a science, and there's no single solution that works best for each client. Many advisors commonly employ the age rule to land on a starting point. The age rule simply states that an investor's equity allocation should be 100 minus their age. So if your client is 45 years old, 100 minus 45 is 55, which means that their portfolio should have a target strategic equity weight of 55% and have allocated 45% between cash and fixed income. Generally, a good number to allocate to cash is between 2 and 5% to put aside funds to cover management fees and any small ad hoc withdrawals that the client may wish to make. Technical minimums and maximums can vary considerably as well. Usually the firm that you work for will dictate the range limit of the band…

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