Governance for Families
The Investment Policy Statement, Explained for Families
A family investment policy statement (IPS) defines objectives, risk, allocation, and the rules managers follow. Why a family needs one, not just a good manager.
Overview
An investment policy statement (IPS) for a family is a written document that defines how the family's capital is to be invested: its objectives, risk tolerance, allocation guardrails, liquidity needs, and the rules managers must follow. It turns investment intent into a standard that outlives any single advisor or market mood.
An IPS is common in institutions and rare in families, which is odd, because a family's capital faces exactly the risk the IPS exists to control: decisions made emotionally, in the moment, without an agreed reference.
What is an investment policy statement for a family?
A family IPS is the agreed rulebook for how the family invests. It states what the capital is for, how much risk the family will accept, how assets should be allocated, how much liquidity must be kept, and what managers are and are not permitted to do. It is the standard every investment decision is measured against.
Its purpose is to make investment decisions repeatable and accountable rather than personality-driven. With an IPS, a decision can be checked against an agreed policy. Without one, it can only be checked against whoever is most persuasive that week.
An IPS is what lets a family judge an investment decision against a policy instead of a personality.
What does a family IPS contain?
A family IPS contains the parameters that govern investing, agreed in advance:
| Element | What it defines |
|---|---|
| Objectives | What the capital is for (growth, preservation, income, legacy) |
| Risk tolerance | How much volatility and loss the family will accept |
| Asset allocation | Target ranges by asset class, with guardrails |
| Liquidity | How much must remain accessible, and when |
| Constraints | What is excluded (sectors, concentrations, leverage limits) |
| Roles & authority | Who decides, within what limits — ties to the DoA |
| Review | How and when the policy and performance are reviewed |
Why does a family need an IPS, not just a good manager?
A family needs an IPS because a good manager manages within a mandate, and the IPS is the mandate. Without it, the family has delegated not just execution but intent, and has no agreed standard to hold the manager — or itself — to. A good manager makes the IPS more valuable, not less.
The IPS also protects the family from its own best intentions. Markets produce moments that invite emotional decisions: a crash that tempts selling, a run that tempts concentration. An agreed policy, written when calm, is what a family returns to when the moment is not. It is governance that runs, applied to capital.
Who writes and owns the IPS?
The family owns the IPS, drafted with its investment advisors and coordinator, and reviewed on a set cadence. Advisors bring the technical shape; the family sets the objectives, risk tolerance, and constraints, because those are choices about the family's life, not just its portfolio. The IPS is owned by the family and lives in its single source of truth, not only in a manager's file.
Frequently asked questions
What is an investment policy statement in a family office?
An investment policy statement is a written document defining a family's investment objectives, risk tolerance, asset allocation, liquidity needs, and the rules managers must follow. It is the agreed standard against which every investment decision is measured, keeping investing accountable to a policy rather than to whoever is most persuasive.
Does a family with one investment manager still need an IPS?
Yes. A single manager still operates within a mandate, and the IPS is that mandate — without it, the family has delegated its intent as well as its execution, with no agreed standard to hold anyone to. One manager makes the IPS simpler to run, not unnecessary. --- **See pricing →**