Every chapter in life brings change—new responsibilities, shifting priorities, and evolving goals. Your investment strategy shouldn’t remain stagnant when your personal circumstances transform.

Why a Living Document Matters

An Investment Policy Statement (IPS) acts as a roadmap, outlining agreed-upon objectives, asset allocation, risk tolerance, and roles for managing your portfolio. However, an IPS is a living document, not a static file filed away and forgotten.

Each major life event can render sections of your IPS outdated. Without timely adjustments, you may face misaligned goals, inappropriate risk exposures, or liquidity shortfalls.

Life Events That Trigger an IPS Update

Understanding which milestones demand a review helps maintain alignment between your financial plan and real life. Common triggers include:

• Marriage or Divorce: Alters household income, beneficiaries, and joint goals.
• Birth or Adoption of a Child: Introduces education funding and extended time horizons.
• Death of a Spouse or Partner: Changes asset ownership, estates, and liquidity needs.
• Retirement: Shifts focus from accumulation to distribution and income stability.
• Inheritance or Windfall: May require rebalancing and new objectives.
• Major Illness or Disability: Increases emergency reserves and health-related expenses.
• Career Change or Job Loss: Impacts cash flow, savings goals, and risk appetite.

Ignoring these major life events can lead to mismatches between your holdings and actual needs, potentially derailing long-term success.

Key Components to Reevaluate

When reviewing your IPS, focus on updating every section that could be affected by your event:

• Statement of Objectives: Clarify primary aims—growth, income, or capital preservation.
• Time Horizon: Adjust for new milestones like college tuition or planned retirement age.
• Risk Tolerance: Reassess willingness and capacity to absorb market volatility.
• Liquidity Needs: Ensure sufficient reserves for emergencies, health care, or major purchases.
• Asset Allocation: Realign target percentages and allowable ranges to reflect new goals.
• Authorized Investments: Add or remove strategies based on evolving preferences.
• Performance Benchmarks: Update metrics for measuring success against revised objectives.
• Roles and Responsibilities: Assign new decision-makers if personal or professional advisors have changed.

The Update Process: Step-by-Step Guidance

1. Assessment of the Event: Document precisely what changed and its financial implications. Identify the sections in your existing IPS that require updates.

2. Review Goals and Objectives: Revisit your primary aims in light of new priorities—whether saving for a child’s education or shifting to conservative investments post-retirement.

3. Reevaluate Time Horizon: A longer or shorter horizon can dramatically alter your asset mix. For instance, extending the investment horizon may allow for a higher allocation to growth assets.

4. Reassess Risk Tolerance: Life transformations often reshape your emotional and financial capacity for risk. Document any shifts in your comfort with volatility or drawdowns.

5. Refine Liquidity Needs: Calculate anticipated withdrawals for new expenses, such as healthcare or family support, and ensure your portfolio maintains an adequate cash cushion.

6. Adjust Asset Allocation: Based on updated risk and time horizon assessments, modify your target weights. For example, a retiree might reduce equities from 60% to 40%.

7. Update Roles and Responsibilities: If you’ve appointed a new trustee, power of attorney, or advisor, reflect those changes. Clear delegation prevents confusion during stressful times.

8. Documentation and Communication: Share the revised IPS with all stakeholders. Ensure formal acknowledgment and signatures to maintain accountability and compliance.

9. Schedule Monitoring: Establish review dates (at least annual reviews) and define triggers for interim checks, such as market shifts or additional personal events.

Sample Triggers for IPS Updates

Best Practices and Benchmarks

• Conduct a full IPS review at least every 3–5 years, even without a triggering event.

• After any major life or market event, perform an interim review within 30–60 days.

• Document percentage adjustments and rationales—for example, moving from a 60/40 stock/bond split to 50/50 for increased stability.

• Incorporate macroeconomic considerations like inflation, interest rates, and regulatory changes that may compound personal impacts.

• Maintain emotional discipline by relying on your structured IPS to guide decisions during upheaval, avoiding reactionary mistakes.

• Uphold fiduciary standards: ensure transparency, due diligence, and responsiveness to material changes, especially for trustees and professional advisors.

Conclusion: Embrace Change, Empower Your Future

Life is an evolving journey filled with unexpected turns. By treating your IPS as a dynamic guide rather than a static blueprint, you maintain alignment between your investments and your personal aspirations.

Regularly updating your IPS after major personal changes safeguards against misalignment, preserves your long-term strategy, and fosters confidence in your path forward. Embrace this practice to ensure that your portfolio remains a faithful partner in achieving life’s most important goals.