Client Investment Policy Statement Builder

# SKILL.md — Investment Policy Statement Builder

## Role
You are a wealth management specialist. Draft comprehensive Investment Policy Statements that document client objectives, investment constraints, asset allocation guidelines, and governance — creating a clear mandate for portfolio management.

## Instructions

### IPS Template

#### Section 1: Client Information and Purpose
```
CLIENT: [Name / Entity]
ACCOUNT(S): [Account numbers]
DATE: [Date of establishment]
RELATIONSHIP MANAGER: [Name, CRD#]

PURPOSE:
This Investment Policy Statement establishes the guidelines, objectives, and constraints
governing the management of [Client Name]'s investment portfolio. It is intended to
facilitate communication between the client and the investment manager and to create
a framework for evaluating portfolio performance.

This IPS is reviewed [annually / upon major life event] and may be amended by mutual
agreement of the client and the investment manager.
```

#### Section 2: Investment Objectives
```
Return Objective:
  Primary: [Capital preservation / Income generation / Capital appreciation / Total return]

  Specific target:
    - Preserve real (inflation-adjusted) value over a [10-year] rolling period
    - Generate annual income of $[X] to supplement other income sources
    - Achieve [X]% annualized total return over a full market cycle
    - Grow portfolio to $[X]M by age [X] for retirement

Risk Objective:
  The portfolio should be managed to achieve the stated return objective while:
  - Limiting annual portfolio loss to no more than [X]% in any 12-month period
  - Maintaining portfolio volatility below [X]% annualized standard deviation
  - Maintaining [X]% probability of meeting retirement income goals (Monte Carlo)

Time Horizon:
  Primary: [X] years ([current year] to [target year/event])
  Investment horizon is [long-term / medium-term]: [rationale]
  Liquidity horizon: [X]% of portfolio may be needed within 1-3 years for [purpose]
```

#### Section 3: Constraints

**Liquidity:**
```
Requirement: $[X] must be available within [X] days without material loss
Current liquidity reserves: $[X] held in [money market / short-term bonds]
Anticipated liquidity events:
  - [Date]: $[X] for [home purchase / education / business investment]
  - [Date]: $[X] for [other known event]
```

**Time Horizon:**
```
This portfolio has a [long-term] investment horizon. Illiquid investments
with lock-up periods up to [5 / 7 / 10] years are [acceptable / not acceptable].
```

**Tax Considerations:**
```
Federal tax bracket: [X]% (ordinary income)
Long-term capital gains rate: [X]%
State income tax rate: [X]%

Tax preferences:
  - Prefer buy-and-hold strategies to minimize capital gains recognition
  - Utilize tax-loss harvesting to offset realized gains
  - Prefer municipal bonds in taxable accounts for [X]%+ tax bracket
  - Maintain asset location strategy: [see Appendix A]
  - [Specific restriction: avoid selling [ABC] stock due to embedded gain of $[X]]
```

**Legal and Regulatory:**
```
This portfolio is managed for a [individual / trust / IRA / qualified plan].
Applicable restrictions:
  - [Trust document dated X/X/20XX imposes restriction on speculative investments]
  - [As a corporate officer, client is subject to Rule 10b5-1 trading restrictions]
  - [ERISA fiduciary standards apply to 401(k) rollover assets]
  - [None — standard individual account]
```

**Unique Circumstances:**
```
ESG / Values-based restrictions:
  Excluded sectors: [Tobacco / Weapons / Gambling / Fossil fuels — specify]
  ESG screening preference: exclusionary / best-in-class / impact investing

Concentrated positions:
  Currently holds [X] shares of [Company] valued at $[X]M
  Strategy for managing concentration: [systematic diversification / options collars / exchange fund]
  Tax management plan for concentrated position: [describe]

Other restrictions:
  [Client employs at XYZ Corp — no XYZ Corp securities]
  [Family foundation assets — no private placements]
```

#### Section 4: Asset Allocation Policy
```
Strategic Asset Allocation (SAA) — Long-term target:

Asset Class               | Target | Min   | Max   | Benchmark
US Equity                 | 40%    | 30%   | 50%   | Russell 3000
  US Large Cap            | 25%    | 18%   | 32%   | S&P 500
  US Small/Mid Cap        | 15%    | 8%    | 22%   | Russell 2000
International Equity      | 20%    | 12%   | 28%   | MSCI ACWI ex-US
Fixed Income              | 30%    | 20%   | 40%   | Bloomberg US Agg
  Investment Grade        | 20%    | 12%   | 28%   | Bloomberg IG Corporate
  Government/Agency       | 10%    | 5%    | 15%   | Bloomberg Treasuries
Alternatives              | 5%     | 0%    | 10%   | N/A
Cash/Equivalents          | 5%     | 2%    | 10%   | 90-day T-bill

Total                     | 100%

Tactical Asset Allocation (TAA) — optional:
  Manager may deviate from SAA within min/max bands based on market outlook
  Tactical deviations must be documented with rationale
  TAA deviations beyond the min/max ranges require client consent
```

#### Section 5: Rebalancing Policy
```
Rebalancing triggers (whichever occurs first):
  - Any asset class drifts more than [5]% absolute from target
  - Calendar rebalancing: [quarterly / annually] review

Rebalancing execution:
  - Use cash flows (contributions, withdrawals) for rebalancing where possible
  - Minimize tax impact: rebalance within tax-deferred accounts before taxable
  - Document rationale for any rebalancing action

Rebalancing exemptions:
  - Positions within [2]% of target may be left unrebalanced
  - During severe market dislocations: manager may delay rebalancing up to [30] days
```

#### Section 6: Performance Evaluation
```
Benchmark:
  Total portfolio: [X]% [Russell 3000] / [Y]% [Bloomberg US Agg] / [Z]% [3-month T-bill]
  Specific benchmarks per asset class: see Section 4

Evaluation period: 3-5 year rolling (not single year)
  Long-term outperformance vs. blended benchmark: primary goal
  Risk-adjusted return (Sharpe ratio) vs. benchmark: secondary goal

Review cadence:
  Monthly: performance reporting
  Quarterly: investment review meeting
  Annual: full IPS review, goal reassessment, rebalancing review

Performance concern thresholds:
  If total portfolio underperforms blended benchmark by >[X]%/year for 3 consecutive years:
  → Formal investment review and explanation of underperformance required
```

#### Section 7: Investment Guidelines
```
Permitted investments:
  ✅ Individual equity securities (US and international)
  ✅ Investment grade corporate and government bonds
  ✅ Mutual funds and ETFs
  ✅ REITs (up to [X]% of portfolio)
  ✅ US Treasury securities, agency bonds, TIPS
  [✅ or ❌] Alternative investments (private equity, hedge funds, real assets)

Prohibited investments:
  ❌ Margin / leverage in taxable accounts
  ❌ Derivatives (except protective put options for concentration positions)
  ❌ Private placements unless specifically approved
  ❌ Investments in [specific excluded sectors per ESG policy]
  ❌ Single-name positions exceeding [10]% of portfolio (concentration limit)
```

## Output Format
1. Complete IPS document (all 7 sections, ready for client signature)
2. Asset allocation summary table with benchmarks
3. Rebalancing trigger matrix
4. Prohibited and permitted investment checklist
5. Review schedule

## Caveats
- IPS is a legal document — have legal counsel review before client execution
- Must be reviewed and updated when client circumstances materially change (retirement, inheritance, divorce, death of spouse)
- The IPS binds the investment manager; ensure it's realistic given available strategies
- Institutional IPS (ERISA, endowments) has additional requirements not fully covered here