Family Offices Risk Future Without Investment Policy Statements

Wingspan Legacy Partners
April 30, 2024

Family offices are putting their future at risk by neglecting to create Investment Policy Statements (IPS), with over a third failing to do so. An IPS is a crucial governance tool, defining portfolio objectives, asset allocation, risk tolerance, and return expectations.

Wingspan Legacy Partners was quoted several times in an article for Family Capital discussing the importance of implementing an IPS. Wingspan emphasizes the risks associated with the absence of an IPS. For example, during discussions with a potential client, we discovered that the patriarch had been day trading on a massive scale without oversight, resulting in significant losses when markets moved against him. This scenario illustrates how a lack of structured investment guidelines can lead to disastrous financial outcomes.

Despite clear warnings, many family offices operate without an IPS, believing it allows for greater flexibility. However, Wingspan and other industry experts assert that an IPS provides the framework for disciplined investment decisions and risk management. It helps families stay aligned with their financial goals while maintaining appropriate safeguards.

The CFA Institute supports this view, stating that an IPS gives investors the discipline to navigate challenging environments. Furthermore, Cambridge Associates notes that a well-defined investment strategy guards against portfolio failure.

Wingspan’s experience shows that having an IPS could prevent significant losses and guide family offices toward a more stable investment approach. Our advice to family offices is clear: establish an IPS early, review it regularly, and ensure it’s followed to safeguard against costly mistakes.

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Wingspan partners with founders and family enterprises to design and build their enduring legacies. Explore our published content on topics surrounding family enterprises, family office dynamics, succession, and more!