India’s population of High-Net-Worth Individuals (HNIs) is projected to reach 16 lakh by 2027. As this segment grows in both size and sophistication, so do the expectations around how wealth is managed, protected, and passed on. Investment decisions are no longer about returns alone, they must account for risk, purpose, legacy, and accountability. This is where an Investment Policy Statement (IPS) plays a critical role.

An IPS is basically a formal document created between an investor (you)and a portfolio manager or investment advisor that outlines investment goals, risk tolerance, asset allocation preferences, and liquidity needs. It enables you and the investment advisor to remain focused on your long-term objectives.

Take a closer look at the benefits an IPS offers to HNIs like you.

Clarity in investment objectives

One of the most useful aspects of an IPS is the clarity it brings to your personal banking journey. Investment goals are frequently discussed in general terms and phrases such as, “long-term” or “growth-oriented”.An IPS brings precision to these discussions. It defines objectives in clear terms.

For example, a 9% post-tax annual return over 10 years, or ₹50 lakh yearly income from debt instruments, or a 20% allocation to global assets for currency diversification. When markets fluctuate, this clarity prevents reactionary decisions that could compromise long-term outcomes.

Defined risk parameters

HNIs usually have the capacity to take risks, but risk appetite and risk tolerance are not the same. An IPS outlines the boundaries of acceptable downside, both in absolute terms and relative to market benchmarks. For example, if your family office decides that the portfolio should not lose more than 15% in a severe market correction, your investment manager is then expected to construct the portfolio with that limit in mind.

This becomes highly critical when managing family wealth across generations. One member of the family might be comfortable with market volatility, whereas another prefers a more conservative approach. Without a written agreement, these differences can lead to confusion or disagreement.A well-drafted IPS makes sure everyone is working with the same understanding.

Personalisation with precision

Every HNI brings different goals to the table, from succession planning and philanthropic ambitions to global diversification and intergenerational transfer. An IPS reflects these layered priorities. It covers granular details, such as:

• Preferable asset classes: Equities, debt, gold, real estate, or alternative investments
• Return expectations: For example, 8–10% post-tax annualised over 10 years
• Income needs: Consistent payouts for lifestyle or charitable giving
• Liquidity requirements:To meet near-term obligations or unforeseen needs
• Ethical preferences: Such as avoiding investments in certain sectors
• Geographical allocation: Based on your comfort with domestic vs. global exposure

These elements help build a portfolio that reflects how you want your wealth to work for you.

Facilitates accountability between stakeholders

An IPS draws clear lines between you and your investment advisor. There is no ambiguity in roles. They know the boundaries like:

• When to rebalance
• How to respond to drawdowns
• What assets not to invest in

You, on the other hand, get a transparent view of how your capital is being allocated and monitored.

In case you work with multiple investment advisors or have family members involved in the process, this document becomes even more critical. Everyone refers to the same reference point. You reduce the risk of inconsistent advice or misaligned portfolio actions.

To sum up                                  

An investment policy statement is a strategic tool that helps you navigate the complexities of wealth management with clarity, discipline, and confidence. It reduces emotion-driven choices, supports objective discussions with your advisors, and keeps your investment approach aligned with your financial goals. Whether your priorities include capital preservation, philanthropy, or global expansion, a well-crafted IPS connects every decision to long-term goals.

Consult a trusted advisor and formalise an IPS today!