Discuss how private clients differ from institutional ones and draft a suitable investment policy statement for a private client
The idea
Private clients differ in having shorter or life-linked horizons, goals such as retirement, education or bequests rather than defined liabilities, individual tax situations, less formal governance and behavioural biases; institutions have committees, regulatory oversight and often explicit liabilities. An investment policy statement for an individual sets out background and goals, return objective, willingness and ability to take risk, time horizon, liquidity, tax, legal and regulatory constraints, and unique circumstances such as concentrated holdings, then the strategic allocation, rebalancing and review. When writing return and risk objectives, reconcile willingness and ability; where they conflict, the lower usually governs, though a client whose willingness lags their ability may be educated. A trap is copying institutional language that ignores taxes and life events.
In the app: 2 practice questions on this outcome, a narrated walkthrough with diagrams, spaced review that brings it back before you forget it.
Take the free diagnostic →More in An Overview of Private Wealth Management
- Discuss the forms that personal wealth takes and how it is built up and shared across the world
- Evaluate how a person's financial choices respond as their economic net worth, and its split between human and financial capital, changes through life's financial stages
- Justify the ties between a person's human and financial capital and their return and risk targets, objectives and constraints
- Evaluate the effect of different taxes on individuals and of inflation on their investment decisions