Let Your Investment Policy Statement—
Not Unexpected Turmoil—Be Your Guide

by A. Scott White, CFP^®, ChFC^®, CLU^®
President, Scott White Advisors

In the 21 years since founding my firm, I’ve had the joys of working with multi-generational families, serving as financial advisor to grandparents, parents and eventually their children. Together with my clients, I’ve celebrated weddings, births, graduations, and retirements.

But those 21 years have also shown me how life can be unpredictable. How families can be affected by an unexpected illness, disability, or death. How a hurricane or other disaster can destroy a home or property. How an unfortunate accident can change the course of a client’s life. And how stock market turmoil can be perceived as a disaster.

It’s been more than 18 months since we first heard the word ‘Covid-19.’ And while we all hope for a future free of pandemics and other disasters, no one knows for certain what the future holds.

Every time any of my clients faces an unexpected challenge, after addressing the immediate needs for health care, shelter or rehabilitation we turn to one guide: their written Investment Policy Statement (IPS). Corporate boards have utilized Investment Policy Statements for centuries, creating them to guide corporate investments. But these documents are essential for individuals and couples, too.

A comprehensive IPS summarizes an individual’s or couple’s investment philosophy and reflects their unique situation, creating a framework from which to make decisions. This custom document can protect investors from unplanned and impulsive revisions to a sound investment strategy during a time of turmoil—whether the turmoil is caused by a personal tragedy or the market. The IPS, like life, is also dynamic. It needs to be reviewed and revised periodically with your financial advisor to adjust and reflect any changes related to the portfolio, your personal situation or the capital markets.

When the market is in turmoil, investors can be more likely to make decisions that are inconsistent with prudent investment management principles—and their own best interest. That’s why, when a new client joins our firm, we utilize a comprehensive process for developing their IPS that includes assessing financial condition; setting goals; developing a strategy to meet those goals; implementing the strategy; and regularly reviewing the results and adjusting as needed.

I make sure that my clients and I create a plan for the family in the event that the investor dies or becomes incapacitated. Our plan includes appropriate strategies to minimize the erosion of investments through credible tax planning and examines property and causality coverage for gaps and loopholes, or title investment accounts to minimize creditors’ and scammers’ access to the family fortune. Our plan will also maximize Social Security and retirement plan benefits and include ways to create a legacy—to let the world know what the client stood for.

The IPS exists as a guide to remind people not to make unplanned and impulsive revisions of a sound long-term policy. With an IPS in place, people are more likely to approach investments in a more disciplined and systemic fashion—even in the face of an unplanned disaster—and increase the probability of meeting their financial goals.

As I look back over my 21 years of serving clients at Scott White Advisors, one thing has stood the test of time: Investment Policy Statements. Those critical planning documents have been a guidepost for clients, in good times and in bad.

Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation. Past performance may not be indicative of future results. Keep in mind that individuals cannot invest directly in any index. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market.

Please note, changes in tax laws may occur at any time and could have a substantial impact upon each person’s situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.

Raymond James is not affiliated with the above organizations and/or charitable causes. Donors are urged to consult their attorneys, accountants or tax advisors with respect to questions relating to the deductibility of various types of contributions to a Donor-Advised Fund for federal and state tax purposes. To learn more about the potential risks and benefits of Donor Advised Funds, please contact us.