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Basic Question 1 of 3

Constructing a policy statement is mainly the responsibility of the ______.

I. financial planner
II. portfolio manager
III. investor

User Contributed Comments 17

User Comment
PedroEdmundo what about the financial planner?
SanderLin The policy statement forces investors to understand their own needs and constraints and to articulate them within the construct of realistic goals.
hanlee21c In real world, financial planners or salespeople lead the way. However, investors should sign the statement after all.
surob I thought the answer is portfolio manager. Hmm....
o123 but isnt it a legal obligation of the planner?
Rotigga So this is assuming that we have a sophisticated investor (pension fund, mutual fund, etc.) and not an average worker.
steved333 generally speaking, this is something that the fp/pm and investor do together. the fp/pm is the expert, but they have a duty to the client. only when the client understands fully what is going on can his/her decisions be reasonable. and only through participation in the process can he or she become truly knowledgeable. then the fp/pm is doing his or her job well and ethically.
MattNYC The CFA states that the IPS is the responsibility of either the investor (alone) or with the help of an investment professional.
magicchip Only the investor would be able to determine the emotional impact of adverse outcomes. There is no way any outsider would be able to.
Simao2009 I really don't think the investor is the one who should do it. The investor only provides raw info to the PM or financial planner and they turn it into a statement so it is their job to do it right?
ciji Even if the planner is not consulted it would not be bad idea to discuss it with ones better half (bitter?)
rhardin I think it should be the responsibility of the PM, so I guess I disagree with the CFA Institute. The investor does not have a "responsibility" to do anything at all... it is his or her money, and if they don't want a plan, thats their choice. However, the PM cannot ethically take anyone's money under management without a policy statement, so it should be the PMs responsibility to make sure the investor sits down and creates one. If the investor won't, then the PM does not take on the client. Therefore, it's the PMs responsibility to see that the policy statement gets done. That's just my take though!
erinelize I agree with rhardin. But I guess for the sake of the test the answer is C.
pb09 In the real-world of institutional investing, IPS's are constructed together by the client (pension fund, foundation, etc...usually has its own CFO or investment committee) and the PM. I can't personally speak to the retail side, but yeah I would think in that case it'd be constructed between the client (individual) and the financial planner (CFP).
gulfa99 if you work in a investment firm, then as per procedure and set guidelines, it is the duty of the portfolio manager to ensure there is ips in place and signed by the customer. If this is not done, its audited and pointed to the mangement.
2014 Ultimately, the decision on allocation of investments determines desired results. The best person who knows returns sources is portfolio Manager. financial planner just helps. But responsibility is on the manager of funds. Financial planner don't generate returns. So they are not responsible. Hence, Investor and PM are responsible for IPS
epfrndz Normally, the portfolio manager doesn't see much clients. It's the relationship managers that do and they understand the clients better than the PM.
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Learning Outcome Statements

describe the reasons for a written investment policy statement (IPS)

describe the major components of an IPS

CFA® 2024 Level I Curriculum, Volume 6, Module 4.