An important aspect of meeting clients’ needs and expectations is to ensure that they have an accurate and up to date Investment Policy Statement (IPS). It’s not expected that an IPS will change often and is unnecessary for short term changes in the financial markets. However, it’s essential that clients who have undergone a significant change in their financial situation adjust both their IPS and their investment strategy accordingly. These range from events like receiving a large inheritance, ending a marriage, or losing a job. Everyone’s financial circumstances evolve over the years so it’s important to review your finances at least annually.
In order to assist clients with the review process a formal Annual Investment Review will be a reminder for clients of the need for a financial reassessment. The purpose of the review is to revisit the fundamentals of the IPS. By reexamining and summarizing the objectives established in the IPS (such as income requirements, liquidity needs, capital preservation and growth requirements), as well as risk tolerances, time horizon and the original asset allocation mix, an advisor can re-cement the clients objectives.
Clients need to review their information carefully. The original objectives, risk tolerance and time horizon were determined when they completed the Know Your Client Questionnaire. If any changes to these items are substantial enough they may elect to complete a new questionnaire. Your portfolio managers can then review it, prepare a new IPS and adjust the portfolio accordingly.
The Annual Investment Review provides clients with a straightforward process for reviewing their accounts and allows them to give feedback as to how well their portfolio is meeting their objectives. By keeping clients involved in the process, along with the transparency of their portfolios and performance, it goes a long ways towards keeping clients informed and satisfied.