Documenting investment decisions at a small RIA: a one-page record for every model change
A small RIA can document investment decisions with a short, dated decision record for each model change: what changed, why, who decided, which accounts it affects, when it takes effect, and what follows (trades, IPS updates, client communication). It doesn't need a formal investment committee. It needs the same few facts written down every time, kept with the model's version history, so anyone can later see why a portfolio changed.
The balanced model moved 5% from bonds to equities last spring. The trades went through, the accounts rebalanced, and a year later nobody can say exactly why, or which accounts followed the change and which didn't. The decision was sound. The record of it doesn't exist.
What should a decision record include?
| Field | Example |
|---|---|
| Date | 14 March |
| Model and version | Balanced, version 3 to version 4 |
| What changed | Equity target from 55% to 60%; bonds from 40% to 35% |
| Why | Two or three sentences on the reasoning |
| Who decided | The adviser or advisers responsible |
| Accounts affected | All accounts following Balanced, or a named exception list |
| Effective date | When trading starts |
| Follow-ups | Trades, IPS documents that describe the allocation, client communication |
Hypothetical example values, for illustration.
Where should it live?
With the model's version history. When someone looks at version 4 of the balanced model, the reason for the change should be right there, not in an email thread.
How does it link to the rest of the record?
- Trades: trades that carry out the change should be traceable to the model and version in force. See the trade blotter.
- Accounts: each affected account's strategy record should show the new version and date. See strategy of record.
- IPS documents: if the IPS describes the allocation, it needs a new version. See when to update an IPS.
- Clients: a short note to clients, if your process or agreements call for one.
A worked example
Take a hypothetical two-person RIA with three models. In its quarterly model review, it changes the balanced model and reviews the other two without changes.
| Model | Outcome | Recorded |
|---|---|---|
| Growth | Reviewed, no change | One line: date, reviewer, "no change", reason |
| Balanced | Equity target raised | Full decision record; version 4 effective 14 March |
| Income | Reviewed, no change | One line |
Ten minutes of writing, and a year later the answer to "why did this change?" is one click away.
Common gaps
- The model changes but the reason is only in someone's memory.
- Accounts that were excluded from a change for a good reason, with no note of why.
- IPS documents still describing the old allocation.
When is this overkill?
A firm that rarely changes its models still benefits from a one-line "reviewed, no change" note each quarter. It's the cheapest evidence that the models are being watched.
How Advorra fits
In Advorra, models are versioned with their allocation, benchmark, rebalancing rules and philosophy; each account's strategy is dated in the Strategy Journal; trades on the blotter link to the strategy they implement; and IPS documents fill from the strategy and keep their versions. See the product page, or read how many model portfolios a small RIA needs.
One thing to do this week: for your most recent model change, write the one-page decision record now, while you still remember why.
About recording investment decisions, not investment advice.
Questions advisors ask
Do I need an investment committee?
Not necessarily. Many small firms don't have one. What matters is recording each decision consistently. Your procedures should describe how decisions are made and recorded.
How long should a decision record be?
One page or less. Long memos tend to stop being written.
Should I record decisions not to change anything?
Recording a review that concluded "no change", with the date and reason, shows the model is being watched, not forgotten.
What about client-specific decisions?
Record those on the client's record: what was decided, why, and the client's agreement.
Is this investment advice?
No. It is about recording decisions. The decisions themselves are the adviser's.
See it on a demo firm
Advorra is practice software for independent RIAs: clients, models, IPS, billing and compliance records in one place, on top of the custodian you already use. Built by The CollabHub.
Get in touch