When IPS Language and Trades Drift Apart
How discretionary overrides accumulate after a desk inherits someone else’s investment policy wording.
Investment policy statements age quietly. A desk merges, a product shelf expands, and the IPS still names concentration limits written for a quieter book. Discretionary trades keep moving.
In sampling work, the first signal is rarely a dramatic breach. It is a cluster of small overrides approved by chat or email, never filed beside the mandate. Relationship managers remember the conversation; the file does not.
A practical check before a full financial audit of wealth management applications: pull one quarter of discretionary trades for ten relationships and ask only whether each trade sits inside the IPS as written — not as people “usually interpret” it. Where interpretation does the heavy lifting, wording or authority needs an update.
Partners sometimes worry this exercise will embarrass the desk. In practice, naming the drift early costs less than discovering it during a client complaint or a fee dispute that opens the same files under pressure.