Advorra blog

How to write an investment policy statement for a small RIA

By the team at The CollabHub · Co-written with Mohammad Aamish Aaftab
Published 18 Sep 2026 · Updated 17 Oct 2026

An investment policy statement (IPS) is the written agreement between adviser and client on how the client's money will be managed: what it's for, how much risk the client can take, what limits apply, and how the account is invested, rebalanced and reviewed. A client IPS should cover scope, objectives, constraints, strategy and allocation, benchmark, rebalancing, monitoring and roles. For a small RIA the hard part is keeping it matched to the model the account actually follows, and reviewing it on a schedule.

The IPS for a client was written three years ago from a Word template. Since then the model it describes has changed twice: a new bond allocation and a wider equity range. The account followed both changes. The document didn't. Nobody did anything wrong; the two were never connected.

What is an investment policy statement for?

An IPS is the written agreement on how a client's money will be managed: what it's for, how much risk the client can take, what limits apply, and how the adviser will invest, rebalance and report. The CFA Institute describes it as a strategic guide to planning and implementing an investment program, covering objectives, performance requirements, risk management and governance (CFA Institute, Elements of an Investment Policy Statement for Individual Investors, 2010).

For a small RIA it does a second job. It is the record of what you said you would do. When the IPS and the account disagree, the IPS is the document someone will read first.

What sections should a small RIA's IPS have?

A small RIA's IPS should have eight sections. Each answers one question the client, or anyone reviewing the file, would ask.

Write the objectives and constraints in the client's terms. "Fund a home purchase in about four years" is clearer to everyone than a risk score on its own.

Why do IPS documents drift away from the account?

They drift because in most small firms the IPS lives in a template and the strategy lives somewhere else. The allocation gets typed into the document once. Then the model changes, a new version goes out to the accounts, and the IPS still describes the old one.

The fix is to treat the strategy as the source and the IPS as something that reads from it. Define the model once, with its allocation, benchmark, philosophy and rebalancing rules, and generate the IPS from it. When the model gets a new version, you know which IPS documents need a review.

A worked example

Take a two-person RIA with about 120 households and three governance levels. The firm is hypothetical. Its balanced model gets a new version that widens the equity range from "55% to 65%" to "50% to 70%".

1. The firm lists every account on the balanced model: 40 accounts across 31 households.
2. Each of those 31 IPS documents describes the old range, so each is flagged for an update.
3. Because the documents read from the model, the new version generates with the new range. The adviser reviews each one, adds any client-specific note, and sends it for signature.
4. As signed copies come back, each is activated with the signature date as its effective date. The old version stays on file with its dates.
5. Three clients haven't signed after a month. Their accounts and documents are listed so the gap is visible, not forgotten.

Without the link between model and document, step 1 is a search through folders and step 2 is guesswork.

How do you keep one template from becoming five?

Use governance levels instead of separate templates. A core mandate, a personalized portfolio and a tactical strategy share most sections but differ in a few. Let the level decide which sections appear, so a simple mandate stays simple and a complex one has everything it needs.

What happens after the client signs?

1. Keep the signed copy with the document, not in a separate folder.
2. Record the effective date from the signature, not the date you uploaded it.
3. Keep every previous version, with its dates, so you can show what was in force at any point.
4. Set the next review date the moment the document becomes active.

When is this overkill?

A solo adviser with one model and twenty clients can keep IPS documents in a folder and a list of effective and review dates in a spreadsheet. The connection between model and document is easy to hold in your head at that size. It stops being easy once you run several models, change them more than once a year, or share clients with a second adviser. That's when documents start to drift without anyone noticing.

How Advorra handles the IPS

In Advorra, an adviser picks a client's strategy and the IPS fills in from it: allocation, benchmark, objective, time horizon, philosophy and risk. Governance templates (Core, Personalized, Tactical) decide which sections appear. Every version is kept, signed copies are uploaded and activated with their effective date, and a 36 month review clock flags documents before they go stale. If your IPS documents are due for a refresh, see how they're built on the product page, or read our custodian-move records checklist.

General information about structuring a client IPS, not legal or compliance advice. Element list adapted from the CFA Institute paper linked above.