Under what circumstances do we revise IPS? We all know there is a need to revise IPS when capital market expectations changes and investors personal circumstances change. But what constituate a change in capital market expectation/personal circumstances? Will an increase in inflation expectation warrant a revision of IPS? What if investor moves into a higher tax bracket or tax rates increase in economy?? What is a standard reasonable time to revise IPS? One year? I know my question is very open ended. But suggestions/guidlines will help for exam. Thanks.
IPS needs to be revisited at least 1x per year. Or if any of the situation changes (return, risk, taxes, time horizon, liquidity needs, unique, or legal) Remember the german family in the text - the kid got in a wreck and needed money NOW. his IPS changed.
yes right. I think i am getting confused in need to revise ‘‘IPS’’ and need to revise ‘‘Strategic Asset Allocation’’. So we will revise IPS everytime there is a change in personal circumstances like tax rate, liquidity req. etc. But what about ‘‘Strategic Asset Allocation’’. I remember a question where Port. manager did not revisit Strategic Asset Allocation on the basis of short term expectations like inflation. ( As i write i recall that ‘‘Strategic Asset Allocations’’ are long term. so short term changes do not effect ‘‘Strategic Asset Allocation’’. So i kind of answer my question). Any other thoughts?
I was just looking at this today. There’s a CFAI EOC question (Reading 14, #3) that has the following triggers for IPS review: -A change in personal circumstances affecting risk-return objectives or contraints -A change in market conditions affecting long-term risk-return relationships -New investment markets or vehicles -A change in tax laws -A severe performance shortfall, sufficient to jeopardize the ability to meet expense needs in excess of income from other sources
Thanks guys. I think i get it now. Any change in personal circumstances or ‘‘Strategic Asset Allocation’’ should be noted in IPS(Revised). But ‘‘Strategic Asset Allocation’’ should be changed only when change is permanant.