What is an investment policy statement (IPS)?
An IPS outlines the rules you want your advisor to follow for your portfolio. These rules can help you avoid making decisions based on your emotions – in good or bad times.
An IPS is a helpful tool for your advisor to have in addition to the "know your client (KYC) form" This link will open in a new window, which your advisor is required to fill out. The KYC form outlines basic details, like your net worth and some information on your risk tolerance, but does not necessarily create a strategy for your investment portfolio.
Effective long-term financial guidance
An IPS does not provide a complete detailed financial plan, but it does provide guidance that ensures your plan stays on track over the long term. Answer all questions as fully as possible so that the results reflect your personal needs and expectations as closely as possible.
This IPS blueprint was created to help you and your financial advisor develop a policy for making investment decisions. Your advisor may use their own standard IPS, but this questionnaire will help you complete the first steps and provide a basis for sound choices so you can better meet your financial goals.
Save a copy
When you’ve answered all the questions, the tool will generate a PDF version of your IPS. You can save and print this for future reference. None of your information will be saved or stored on this site.
Step 1 of 5 - About you
1) Your investing knowledge
Your level of investing knowledge tells your financial advisor whether or not you are likely to understand investing terms and decisions.
From the following, choose the statement that best describes your knowledge about investment products and services and then define your reliance on your advisor.
2) Minimizing tax
Tax plays a key role in how you invest. Depending on the type of account you use to invest your money (registered or non-registered accounts), the type of income generated by your investments and whether you hold foreign investments, you will be taxed differently. Your advisor can determine the federal and provincial tax information that applies to you, based on your income.
Learn more about how investments are taxed
Step 2 of 5 - Goals
3) Your investing goals
Rank your investing goals
Assign a rank of importance to each goal.
The way you rank your goals is up to you – for example, you may rank by time horizon, or by the amount you need to reach your goal. Learn more about creating an investment plan
Learn more about different account types You can use different account types and registered plans to save for your goals. The allowable types of accounts depend on the goal you are saving for. Learn more about registered retirement savings plans (RRSPs), tax-free savings accounts (TFSAs), registered education savings plans (RESPs), registered retirement income funds (RRIFs) and registered disability savings plans (RDSPs).
Retirement (savings/income)
Home purchase
Income replacement / supplement / emergency fund
Post-secondary education
Legacy bequest
Milestone event (e.g., a wedding)
Help a loved one with a disability
Other:
4) Investment risk and reward trade-offs
Generally, the higher the risk of an investment, the higher the potential return. Accepting higher risk doesn’t guarantee a higher return; it only increases the potential for higher returns. It also increases the potential for losses.
Some investments are riskier than others, but all investments have the potential to lose money – even those with very little risk. Taking little or no risk and receiving low returns may affect your ability to reach your goals. Learn more about why risk matters and the risk-reward relationship.
Retirement (savings/income)
In general, you can take more risk with longer-term investment goals, since you have more time to make up potential losses.
Your time horizon also relates to the liquidity of your investments – you may need to hold more liquid assets so you can access the funds when you need them. Learn more about your time horizon and risk.
Home purchase
In general, you can take more risk with longer-term investment goals, since you have more time to make up potential losses.
Your time horizon also relates to the liquidity of your investments – you may need to hold more liquid assets so you can access the funds when you need them. Learn more about your time horizon and risk.
Income replacement / supplement / emergency fund
In general, you can take more risk with longer-term investment goals, since you have more time to make up potential losses.
Your time horizon also relates to the liquidity of your investments – you may need to hold more liquid assets so you can access the funds when you need them. Learn more about your time horizon and risk.
Post-secondary education
In general, you can take more risk with longer-term investment goals, since you have more time to make up potential losses.
Your time horizon also relates to the liquidity of your investments – you may need to hold more liquid assets so you can access the funds when you need them. Learn more about your time horizon and risk.
Legacy bequest
In general, you can take more risk with longer-term investment goals, since you have more time to make up potential losses.
Your time horizon also relates to the liquidity of your investments – you may need to hold more liquid assets so you can access the funds when you need them. Learn more about your time horizon and risk.
Milestone event (e.g., a wedding)
In general, you can take more risk with longer-term investment goals, since you have more time to make up potential losses.
Your time horizon also relates to the liquidity of your investments – you may need to hold more liquid assets so you can access the funds when you need them. Learn more about your time horizon and risk.
Help a loved one with a disability
In general, you can take more risk with longer-term investment goals, since you have more time to make up potential losses.
Your time horizon also relates to the liquidity of your investments – you may need to hold more liquid assets so you can access the funds when you need them. Learn more about your time horizon and risk.
Other
In general, you can take more risk with longer-term investment goals, since you have more time to make up potential losses.
Your time horizon also relates to the liquidity of your investments – you may need to hold more liquid assets so you can access the funds when you need them. Learn more about your time horizon and risk.
Step 3 of 5 - Strategy
5) Borrowing to invest
Borrowing money to make investments (e.g., to make an RRSP contribution) adds considerable risk to your portfolio. Generally, borrowing to invest is only advisable for investors who are highly knowledgeable and experienced and can afford a loss. There’s no guarantee you’ll earn a high enough return to cover your borrowing costs.
Learn more about borrowing to invest.
For the purpose of this IPS, do not include borrowing for a home purchase (getting a mortgage).
6) Investment style
Some investors have specific preferences about the style of investment management they want; others may mix styles to achieve their goals. For each investment style below, state whether you want it to influence your investment choices, or if you need more information about it.
7) Investment preferences and constraints
Some investors want to own certain investments that fit with their personal values. For example, you may want to invest in socially responsible companies that support environmental stewardship. Or, you may want to avoid investing in certain companies or industries that do not align with your values; e.g., owning stocks in a tobacco company.
If you want to own – or avoid – specific investments, identify them below.
8) Asset allocation
One of your advisor’s key responsibilities is to recommend an asset mix of equities, fixed income and cash-equivalent investments that will diversify your portfolio and manage risk, based on your goals, risk tolerance and time horizon.
You can diversify your portfolio in many ways, such as by asset class, industry or geographic location. Learn more about choosing your asset mix and diversification.
See how different asset classes have performed in the past using this Portfolio benchmark calculator.
Investing in different geographic locations can help you diversify your portfolio, but may also add additional risks and certain tax limitations.
9) Dealing with investment losses
When your investments lose value, having a plan for what to do can keep you from making investing decisions based on your emotions, and possibly regretting it later.
If your investments lose value, you may decide to take a loss and sell some or all of the investment, you may decide to buy more to take advantage of lower stock prices or you may choose to do nothing. Consider the time horizon of each goal – if you have a longer time horizon, your plan may be more tolerant to losses. Learn more about how time horizon affects investment, and see average returns over different time periods. In a market downturn or event affecting some or all of your investments, you should consult with your advisor on the best course of action, but the questions below will help you determine your tolerance for losses.
For each of your goals, indicate:
- Do nothing: The highest investment loss percentage at which you will hold your investment without buying or selling
- Loss to buy: The investment loss percentage at which you will consider buying more to take advantage of lower stock prices
- Loss to sell: The investment loss percentage at which you will consider selling some or all of your investment
Retirement (savings/income)
Home purchase
Income replacement / supplement / emergency fund
Post-secondary education
Legacy bequest
Milestone event (e.g., a wedding)
Help a loved one with a disability
Other
Step 4 of 5 - Monitoring
10) Frequency of contact with advisor
Step 5 of 5 - Results
Congratulations on completing your IPS
Your IPS should help you and your financial advisor make better decisions about your investments to meet your goals.
Remember to save and print your IPS before closing this page. Your data will not be saved and cannot be recalled.
Disclaimer
The "Your investment policy statement blueprint" tool is to be used for information and educational purposes only. It is not intended to provide financial or legal opinions or advice. If you want information about a specific financial or investing issue, consult an appropriately qualified professional advisor.