How AI is Changing Investment Policy Statements

July 5, 2024
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For financial advisors and investors, creating comprehensive, customized investment policy statements is a critical yet time-consuming task. An investment policy statement is essentially the rulebook that governs all investment activities, outlining goals, strategies, risk parameters and guidelines. It keeps clients and advisors aligned and on track.

However, the process of manually drafting these detailed documents is labor-intensive and often prone to errors, inconsistencies, and continual revisions. Consequently, many advisors avoid this process altogether, which can lead to potential risks, including legal ones. Instances of financial advisors being sued because a client alleges that the portfolio underperformed or was not managed as agreed are not uncommon. Others use investment policy statement templates, which is more efficient but still time-consuming.

Therefore, while the creation of investment policy statements is important, it is also crucial to make them as easy to generate as possible. This is where an AI-powered investment policy statement generator comes in.


Investment policy statements are critical governance documents, but manually creating them is painfully inefficient

✔️ New AI-powered investment policy statement generators can auto-create custom investment policy statements in minutes based on client inputs

✔️ Advantages include massive time savings, scalability, accuracy, and continuous improvement

✔️ Human advisors review AI-generated investment policy statements before finalizing to ensure quality control

✔️ Investment policy statement software empowers advisors to deliver premium investment governance efficiently

✔️ Firms embracing AI for investment policy statements and other workflows gain major competitive advantages

The Rise of AI for Automated Investment Policy Statement Generation

Artificial intelligence has already transformed many industries, and now it's revolutionizing how financial advisors generate investment policy statements. AI-powered investment policy statement generator software can now auto-generate fully customized investment policy statements in a matter of minutes based on client inputs.

But this goes far beyond basic document automation. The AI systems are trained on millions of data points from existing investment policies across countless client scenarios. This allows the AI to identify patterns, understand context, and construct dynamic templates that can adjust to any possible input permutation.

Creating an AI-Powered Investment Policy Statement

The most advanced AI-powered investment policy statement software goes beyond just automating the document creation itself. It completely streamlines and digitizes every preceding step of gathering client data inputs.

Rather than advisors having to manually input all of the client's risk profiles, investment goals, portfolio details and more into the system, the AI handles this automatically by integrating with other tools.

For example, the AI can seamlessly ingest data from client risk tolerance and portfolio assessments, investor profile questionnaires, and more. It analyzes and synthesizes this data holistically to automatically construct a comprehensive client profile.

Other software may need the advisor to simply input the key client information, such as:

  • Investment goals and time horizons
  • Risk tolerance levels
  • Expected liquidity needs
  • Tax implications
  • Asset class preferences
  • Environmental, social and governance (ESG) specifications
  • Any constraints or restrictions

Regardless of which type of software is used, this unified data foundation serves as the basis for the AI investment policy statement generator to then intelligibly assemble a fully structured investment policy statement, providing detailed coverage on sections such as:

  • Portfolio objectives and performance benchmarks
  • Strategic asset allocation weights and ranges
  • Permitted and prohibited investments
  • Rebalancing protocols
  • Manager selection and monitoring criteria
  • Risk management practices
  • Reporting requirements

Greater personalization

Not two clients are the same, so no investment policy statement should be either. AI investment policy statement generators can enhance personalization by being able to dynamically adjust the language, structure and level of technical detail in the statement based on the client's specified goals, portfolio complexity and investment sophistication level.

For example, the investment policy statement for an individual investor with a basic 60/40 portfolio strategy will look very different than an institutional investor's investment policy statement with complex asset class factors, ESG overlays, alternative investments and stringent risk controls.

So in essence, the AI creates a fully customized investment policy statement tailored to each specific client situation - with minimal human effort required.

Streamlining the Entire Investment Management Workflow

While the AI-powered investment policy statement generator is powerful on its own, the real breakthrough comes from integrating it into a unified, end-to-end digital platform.

This allows the automated investment policy statement to seamlessly connect to other critical digital advice tools and solutions - creating a smooth, efficient, and highly personalized process from start to finish.

Establishing the data foundation: from risk profiling to proposals

It begins with a comprehensive risk assessment of the client's existing financial situation and portfolio using intelligent risk profiling software. This provides a granular analysis of their risk tolerance, return targets, and investment suitability based on their specific circumstances and goals.

The risk assessment data is then fed directly into AI-driven proposal generation tools. These construct a detailed, personalized proposal comparing the client's current portfolio strategy against a recommended target portfolio designed and optimized by the AI to better achieve their objectives.

Seamless integration: investment policy statement generation

With the risk profile and proposal in place, the unified AI platform seamlessly flows into generating a fully customized investment policy statement. The investment policy statement naturally aligns with and formalizes all of the strategies, guidelines and parameters established in the preceding analysis and recommended proposal.

What used to be a fragmented, disjointed series of repetitive manual processes is now transformed into a streamlined digital experience for the advisor and client alike. As the client's situation evolves over time, any updates to the risk assessment can automatically trigger updates to the proposal, investment policy statement, and managed portfolio.

By leveraging artificial intelligence to automate the interconnected workflows across risk analysis, portfolio proposals, investment policy statement generation, and ongoing portfolio management, advisors can deliver an extremely high-quality, personalized, and consistent experience while saving countless hours previously spent on repetitive tasks.

Estimates show this level of comprehensive digital automation can reduce the total time spent on client acquisition, onboarding, and investment management by upwards of 90% compared to traditional processes. This unlocks exponential productivity and scalability gains for advisory firms willing to go all-in on AI-driven client services.

Advantages Over Manual Investment Policy Statement Generation

While the process of manually drafting investment policy statements was prone to inconsistencies, oversights and costly inefficiencies, AI-powered automation offers several key advantages:

  1. Seamless Data Integration: The most advanced AI investment policy statement software automatically ingests and synthesizes client data from the firm's existing tech stack - risk profiles, portfolio details, and more. This eliminates duplicative manual entry efforts.
  2. Massive Time and Cost Savings: What might take advisors days or even weeks, the AI can produce in moments by leveraging automated data flows - eliminating hundreds of billable hours.
  3. Scalability and Growth Enablement: Human bandwidth constraints are eliminated, enabling an advisor to instantly generate investment policy statement documentation for any number of new clients in a seamless, automated fashion.
  4. Accuracy and Consistency: The AI mitigates the risk of manual errors and ensures accurate, consistent terminology and language across all statements.
  5. Continuous Improvement: The AI's output quality continues improving over time as it learns from user feedback and adjusts its patterns accordingly.
  6. Impressively Comprehensive: While humans may overlook certain minor components, the AI accounts for even the most granular investment policy statement details.
  7. Streamlined Client Experiences: The accelerated, automated investment policy statement generation turnaround means advisors can onboard new clients faster and more efficiently.
  8. Advisor Time for Higher-Value Activities: With the AI handling the labor-intensive investment policy statement drafting and data aggregation, advisors can focus on higher-value tasks like portfolio strategy and holistic financial planning.

The Human-AI Collaboration

While AI makes the investment policy statement generation process seamless, it's critical that human advisors review each AI-generated statement and provide the final approval. The AI should be thought of as an intelligent assistant working in tandem with human expertise.

Advisors may opt to tweak certain components or add more customized language where needed. This human oversight enables quality control while retaining the AI's efficiency benefits.

Additionally, more advisors can utilize the AI's dynamic capabilities for continuous investment policy statement improvement and personalization. For example, updating an investment policy statement to reflect changes in a client's personal circumstances like net worth events, revised goals, evolving market dynamics, new regulations or tax laws. With the advisor's high-level guidance, the AI can quickly modify the investment policy statement details and realign it with the client's best interests.

The Future of AI-Augmented Advising

Overall, the rise of AI for automated investment policy statement generation is a paradigm shift for the financial advisory space. It empowers advisors to deliver institutional-quality investment governance at scale with incredible consistency and efficiency.

Leveraging transformative technologies like AI is becoming a competitive necessity for advisory firms. Those who embrace tools like automated investment policy statement generation will be well-positioned with a significant operational edge.

Advisors can future-proof their practices by harnessing the AI's power for creating core client deliverables like investment policy statements. This opens up time and capacity to focus on what really matters - building trusted relationships and providing holistic, personalized advice to help clients achieve their biggest financial goals.

Investipal’s AI Investment Policy Statement can streamline your entire process

Investipal's AI-driven platform automates your workflows, from risk assessments to proposals to investment policy statements and beyond. This enhances personalization and reduces the time spent on processes by 90%, freeing up your valuable time and allowing you to focus on what truly matters – your clients and the growth of your business.

Ready to revolutionize your workflow? Get Started with Investipal.

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