How to Create an Investment Policy Statement for Your Family

There is a grim statistic in wealth management: 70% of wealthy families lose their fortune by the second generation. 90% lose it by the third.

The cause of this destruction is rarely a bad stock pick or a market crash. It is a failure of Governance.

Without a constitution, a family fortune is just a pile of money subject to the whims, emotions, and conflicts of its beneficiaries. To preserve wealth across generations, you must stop treating your capital like a personal checking account and start treating it like an Institution.

You need an Investment Policy Statement (IPS).

This is not a "financial plan." It is a binding legal and strategic document that defines the rules of engagement for your capital. It strips emotion out of the equation. Here is how to write the constitution that ensures your legacy survives you.

1. Define the Mandate: "Growth" vs. "Preservation"

Before you pick a single stock, you must define the purpose of the money. A lack of clarity here is the root of all family conflict.

• The Preservation Mandate: The goal is to never lose purchasing power. The payout is limited to the inflation-adjusted return. This is the "Old Money" model.

• The Growth Mandate: The goal is aggressive expansion. This requires higher risk tolerance and illiquidity. This is the "Empire Building" model.

• The Policy: Explicitly state the return target (e.g., "CPI + 4%") and the acceptable volatility limits. This prevents future arguments when the portfolio is down 10% but still performing within its mandate.

2. The Asset Allocation Architecture (The Policy Mix)

This is the core of the document. You must define the "Strategic Asset Allocation"—the baseline targets for where capital should live. Sophisticated families do not use a simple 60/40 stock/bond split. They follow the Endowment Model (Yale/Harvard), which heavily favors private markets.

Sample IPS Allocation:

• Public Equities: 30% (Global liquidity)

• Fixed Income: 15% (Deflation hedge)

• Private Equity: 25% (High growth/Illiquidity premium)

• Real Assets: 20% (Inflation hedge/Real Estate)

• Cash/Equivalents: 10% (Opportunistic dry powder)

The Rule: Your IPS must strictly define the Rebalancing Bands. If Public Equities rally to 40%, the document forces you to sell and buy underperforming assets. It automates "buy low, sell high."

3. Governance: The "Investment Committee"

Who pulls the trigger? In a family office, the "benevolent dictator" model works for the first generation but fails for the second. Your IPS must establish an Investment Committee.

• Membership: Define who gets a vote. Is it just family members? Do you bring in an independent advisor to break ties?

• The Veto: Does the matriarch/patriarch hold a veto power?

• Conflict of Interest: Explicitly ban family members from pitching their own "pet projects" or friends' startups unless they go through the same rigorous due diligence as an external deal.

4. Liquidity & Spending Rules (The Drawdown)

How do you get money out? The fastest way to destroy a fortune is to treat the principal like an ATM. The IPS must set a Spending Policy.

• The 4% Rule: A standard cap on annual withdrawals to ensure the principal survives inflation.

• Liquidity Tiers: Define how much of the portfolio must remain liquid (convertible to cash in < 3 days) to meet capital calls or tax bills. This prevents the disastrous scenario of being "asset rich, cash poor" and forced to fire-sale a prize asset to pay a bill.

The Execution Gap: Professionalizing Your Private Market Approach

Writing an IPS is the easy part. Executing it—specifically the Private Market allocation—is where families fail. Allocating 45% of your portfolio to Private Equity and Real Estate sounds sophisticated on paper, but in practice, it is administratively chaotic. Most families simply lack the infrastructure to source, vet, and manage these deals effectively.

AnyOffer acts as the operating system for your Family IPS.

We provide a centralized platform that brings institutional discipline to your private investments. Instead of managing your legacy through scattered emails and fragmented brokers, AnyOffer consolidates your deal flow into one secure, professional environment.

Whether you are looking to acquire a new commercial property to meet your "Real Assets" target, or divest a family business to rebalance your portfolio, AnyOffer allows you to execute with the same rigor and efficiency as a top-tier family office. An Investment Policy Statement is only as good as the tools you use to enforce it.

[Professionalize your family office execution at AnyOffer.com.]