Communicate Assumptions and Factors Which Affect Financial Outcomes
The financial plan and investment policy statement are the two most important documents for communicating and directing the duties and responsibilities for the implementation and monitoring of the investment strategy. A financial advisor must explain in writing and explain in detail to the client the critical assumptions and factors that can affect the potential outcomes of the financial plan and investment strategy. The following factors should be discussed and communicated:
- Changes in personal circumstance;
- Unforeseen risks;
- Interdependence of the recommendations made;
- Market forecasts and economic assumptions;
- Changes in tax legislation;
- Timeliness of information and execution;
The investment policy statement provides guideposts during periods of market volatility and uncertainty with a framework focused on the established investment portfolio parameters. The investment policy statement provides financial guideposts comprised of policies and procedures to aide in investment decisions. It provides a baseline from which to monitor portfolio performance towards all of your stated goals. Finally, your investment policy statement can enhance your estate plan by providing direction for executors and heirs with methods to continue prudent management.
