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How to Write an Investment Policy Statement, 2nd Edition

Book Description

An indispensable resource for every financial service professionals developing an IPS

The Investment Policy Statement (IPS) is one of the most critical documents fiduciaries must draft. For years, ERISA and other industry regulations have governed the guidelines all fiduciaries must comply with when drafting one. But the current climate of corporate scandal and the 2008 global banking crisis have led to increased scrutiny by regulators, prompting firms to take a closer look at the quality and integrity of their IPSs and to take steps to have a rigorous formal process in place for drafting them. Endorsed by the Foundation of Fiduciary Studies, this concise guide provides a rigorous framework and the expert insight, information and guidance you need to guarantee that your IPS is in complete compliance with all ERISA-directed requirements.

  • Provides a step-by-step plan for creating a uniform IPS that every advisor in the office can follow

  • Defines the duties and responsibilities of all parties involved, while clarifying diversification guidelines and providing methods for keeping costs under control

  • Packed with ready-to-use templates, sample forms, letters and other documents, diagrams and other valuable tools, including sample Policy Statement downloadable at the companion website

  • Designed to get you quickly up to speed on what you need to know to confidently serve your clients with the highest standards of care and protection

Table of Contents

  1. Cover
  2. Contents
  3. Title
  4. Copyright
  5. Foreword
  6. Section One: Why Plan Sponsors and All Fiduciaries Need a Formal Process for Writing Their Investment Policy Statement
    1. Chapter 1: Erisa and the Challenge of Fiduciary Responsibility
      1. Writing an Investment Policy
      2. What Is a Fiduciary?
      3. Fiduciary Liability
    2. Chapter 2: Your Fiduciary Responsibilities and Liabilities Under Erisa
      1. Five Fiduciary Responsibilities
      2. Fiduciary’s Personal Liability
      3. A Fiduciary’s Primary Role Is to Manage the Process
    3. Chapter 3: What Is an Investment Policy Statement and What Are the Benefits?
      1. Risk Management
      2. Monitor Investments
      3. Summary
    4. Chapter 4: Utilize the “Safe Harbor” Provisions Provided by Erisa
      1. Prudent Experts
      2. Five Recognized “Safe Harbor” Rules
    5. Chapter 5: Complying with Erisa Section 404(c)
  7. Section Two: How to Get Started and Steps to Formalize the Process
    1. Chapter 6: Assembling the Documentation
    2. Chapter 7: Steps to Formalize the Process
      1. Step 1: Decide on Plan Goals, Objectives, and Strategies
      2. Step 2: Decide on Strategy for Managing Risk
      3. Step 3: Determine the Risk Tolerance of the Plan
      4. Step 4: Set Forth Guidelines for Asset Classes
      5. Step 5: Implement an Asset-Allocation Policy
      6. Step 6: Mutual Funds Recommendations
      7. Step 7: Delegate Investment Management Responsibility
      8. Step 8: Investment Monitoring and Reporting
  8. Section Three: The Template IPS
    1. Chapter 8: Sample IPS Templates
      1. Two Distinct IPS Samples
      2. Organization of Templates
    2. Chapter 9: Sample IPS Template #1
      1. Step 1. Executive Summary and Background
      2. Step 2. Purpose of the Investment Policy Statement
      3. Step 3. Duties and Responsibilities
      4. Step 4. Asset Class Guidelines
      5. Step 5. Investment Manager Selection
      6. Step 6. Monitoring the Investment Managers
      7. Step 7. Controlling and Accounting for Investment Expenses
      8. Step 8. Investment Policy Review and Monitoring
    3. Chapter 10: Sample IPS Template #2
      1. Executive Summary
      2. Part I—Purpose
      3. Part II—Investment Management Objectives
      4. Part III—Roles and Responsibilities
      5. Part IV—Investment Manager Selection
      6. Part V—Investment Monitoring and Review
      7. Part VI—Manager Termination
      8. Part VII—Additional Provisions (optional)
  9. Conclusion: Message to Plan Sponsors
  10. Glossary
  11. Appendix
  12. About the Author