How to write return objective for Individual IPS

I’m having difficulty figuring out how to write the return objective for individuals for IPS statements. It seems like this has been on the test every year and I am not good at writing it. I can usually come up with the return required but I can’t seem to write out the return objective statement. Usually I say something along the lines of the following: Achieve an after-tax return that preserves capital in relation to inflation and takes into consideration the constraints of the portfolio. This seems to general/crappy to me. Anyone got a better method?

Use bullet points The return objective for So and So is: -Support their living expenses during retirement -Provide cash flows to specific things (include here things like mortgages, childrens’ tuition, annual donations to charities, whatever the case mentions; keep it qualitative) -Maintain inflation-adjusted value of portfolio The last bullet point could be different if the case says the individual wants to have no money left at death or wants to have a certain amount of money left at death, etc. In that event, instead of maintaining the value, that part of the objective is to have no money left after xx years or have X million left after xx years. The case will provide the expected number of years until death. This is what you need to write. This is all you need to write. Do not include any numbers like the return requirement or specific cash flow amounts. The return objective is qualitative in nature. There will be a separate question for the return requirement. That is where you get quantitative. Don’t complicate the return objective.

Yeah often its to maintain the real value of the portfolio after all withdrawals. I’ve also seen “maximise returns subject to risk tolerance” in a schweser solution. I guess it often depends on what information they give you in the vignette.

If you are asked to “calculate” then just calculate, if “formulate”, then maybe say one or two sentences like: preserve the principal, meet the liability, meet the spending requirement, meet the expense requirement blar blar blar.

CFAI should really never ask you to “calculate” a return objective. The exam will say “prepare” or “formulate” or “state” the return objectives. Look at the last 3 exams for how they ask the question and what the CFAI answer is. This is how you need to answer the question. The exam WILL ask you to “calculate” the return requirement. A key point that gets missed a lot is the difference between an return objective and a return requirement. The return objective is what they will use the portfolio for. The return requirement is what they need to earn in order to accomplish the objective.

excellent, much thanks

these are layups… know how to do them… easy points.

programmer Wrote: ------------------------------------------------------- > these are layups… know how to do them… easy > points. Didn’t you pass last year?

No… band 10… =(

I just did Question 2.B.i. from Reading 20 and it said the return objective was “weak” because it failed to include a specific return requirement.