What aspect should NOT be agreed upon in an investment policy statement between a client and an investment professional?

An investment policy statement (IPS) is a critical document that outlines the guidelines and objectives for an investment portfolio. When developing an IPS, it is essential for both the client and the investment professional to agree on key elements that govern the investment decisions made on behalf of the client.

While aspects such as investment strategy, risk tolerance, and time horizon reflect the client's preferences and financial situation, specific investments should not be predetermined within the IPS. The reason for this is that specific investments can be subject to market fluctuations, and the investment landscape constantly changes. Therefore, the IPS should focus on broader investment parameters rather than locking in particular assets. This flexibility allows the investment professional to adapt to new market opportunities as they arise and make investment decisions that align with the overall strategy and objectives agreed upon in the IPS.

By ensuring flexibility in the choice of specific investments, the policy can remain relevant and effective in achieving the client’s goals, even amid changing market conditions. This differentiation allows for a proactive investment approach that is responsive to market dynamics while still adhering to the client’s risk tolerance, time horizon, and investment strategy agreed upon in the IPS.