How often should an IPS be monitored and reviewed?

Question

AcadiFi · Accepted Answer

The IPS is a living document. CFA guidance specifies: 1. Scheduled annual review. At minimum. Reaffirm objectives, constraints, and asset allocation. Update return expectations if capital market assumptions have changed materially. 2. Event-driven review. Triggered by material life events: - Change in client wealth (inheritance, business sale, major loss) - Marriage, divorce, birth, death in family - Career change, retirement - Change in health or life expectancy - Change in risk tolerance (typically post-crash) - Change in regulation or tax law affecting the client 3. Market-driven review. When portfolio drifts materially from target (e.g., >5% off on major asset classes), rebalance and reconfirm targets. A market event doesn't itself change objectives but can trigger a conversation. 4. Strategic review every 3-5 years. Deeper review of long-term assumptions, asset class roles, and manager selection. Monitoring activities (continuous, not event-driven): - Performance measurement vs benchmark and objective. - Attribution analysis (asset allocation vs security selection). - Fee and cost review. - Risk-metric tracking (vol, drawdown, tracking error). - Compliance with IPS constraints (liquidity buffer, ESG exclusions, position limits). ```mermaid flowchart LR A[IPS] --> B[Annual
Review] A --> C[Life
Event] A --> D[Market
Event] A --> E[Strategic
3-5 yr] B --> F[Update
IPS] C --> F D --> F E --> F ``` A concrete example: Esmeralda Harlig receives her quarterly performance report plus annual IPS review. In year 3 her employer gives her a $300K RSU grant — triggering an event-driven review. She and her advisor update the IPS: concentrated-stock section added, tax planning for vest schedule documented, gradual diversification plan set. The following year her mother passes, adding a $1.2M inheritance — another event review to incorporate new wealth and any estate-planning priorities. Documentation: every review meeting should produce a memo confirming (a) what was discussed, (b) what changed in the IPS, (c) client acknowledgment. CFA exam tip: annual minimum, plus event-driven. Performance alone doesn't trigger a strategy change — but it triggers a conversation.

How often should an IPS be monitored and reviewed?

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