An Investment Policy Statement is a written document, usually no longer than 10 to 15 pages, that records what an individual's or a family's investment capital is for and the rules by which it will be invested: the objectives it must meet, how it is divided across asset classes and currencies, the limits within which it may move, and who decides when those limits are reached. It is drafted by the advisor with the client and signed by both. Pension funds and endowments have worked from such documents for decades. Most private investors have not.
Without one, investment decisions tend to arrive one message at a time. A banker sends a rate on a Friday afternoon, a reply goes back before the weekend, and a meaningful share of the portfolio moves. Each decision is reasonable on its own. A portfolio built one sensible decision at a time can still have no plan, and after 5 years nobody can say what it was meant to achieve, or whether it still does.
The statement is drafted with the client and signed by both sides
The statement sits alongside the advisory agreement and does a different job. The agreement sets the terms of the relationship: its scope, fees, and responsibilities. The statement sets the terms for the capital itself. The advisor drafts it after a full review of the client's position, the client reviews and amends it, and both sign. Where another person shares authority over the capital, such as a spouse or an adult child, they sign too.
In a non-discretionary advisory relationship, where the advisor recommends and the client makes every investment decision, the statement is the reference point for both. The advisor's recommendations are tested against it, and the client's decisions can be measured against what was agreed in calmer conditions.
Its core provisions cover objectives, allocation, limits, and review
A useful statement begins with objectives stated precisely, each with a currency, an amount, and a date. "Long-term growth with moderate risk" settles nothing. "University fees for 2 children, in sterling, from 2031" settles a great deal, because it fixes how much must be available, in which currency, and when. For an individual without dependants, the same discipline applies to an annual income that would allow the principal to step back from work, a property purchase abroad, or capital set aside for later life.
The remaining provisions follow from the objectives. The strategic asset allocation is the long-term division of capital across asset classes such as equities, bonds, and cash, each with a target weight and a permitted range. The benchmark is the reference index, or blend of indices, against which results are judged. The rebalancing rule states what happens when market movements push an asset class outside its range, a process known as drift; typically, the advisor recommends trades to bring it back. The statement also records constraints, such as a requirement for Sharia-compliant instruments, which in Nigeria include FGN Sukuk (sovereign Islamic bonds), and sets a schedule for review.
An illustrative excerpt shows how such provisions read in practice:
- Objective 2. University fees for 2 children, in sterling, estimated at £45,000 a year per child, fees and living costs combined, from September 2031 to June 2038.
- Allocation. Global equities 30% (range 25% to 35%). Global bonds 20% (15% to 25%). FGN bonds and Treasury bills 25% (20% to 30%). Nigerian equities 10% (5% to 15%). Dollar and sterling cash 15% (10% to 20%).
- Rebalancing. Where any asset class moves outside its range, the advisor will recommend corrective trades within 10 business days. The principal will approve or decline within 10 business days of receiving the recommendation.
- Liquidity. The equivalent of $100,000 is to be available in dollars or sterling within 5 business days at all times.
The figures above are illustrative only and do not represent a recommended allocation.
The statement must record currency, liquidity, and scope
Three provisions carry particular weight for Nigerian high-net-worth individuals and families. The first is the currency in which results are measured. Naira returns can look healthy while purchasing power against sterling or dollar obligations declines, as the years since the unification of Nigeria's exchange rate windows in 2023 have shown. The statement should name the measurement currency, the minimum share of capital held in hard currency, and the role of naira instruments. The reasoning behind that split between naira and hard currency is a subject of its own; the statement is where its result is written down.
The second is liquidity: how much capital must be available, in which currencies, and within how many days, allowing for the time that conversion, transfer, and the documentation checks of international banks can add.
The third is scope. For many founders, the investable portfolio is the smaller part of their position, beside an operating business and property in Lagos or Abuja. The statement should record what it governs and what it does not, so that the portfolio's allocation is set with the whole position in view.
Writing it down settles who decides when conditions change
An understanding held in conversation holds until it is tested. Through the high-yield years of 2024 and 2025, a great deal of capital moved into naira Treasury bills, one sensible rollover at a time. Few of those decisions were written down, so few holders can say today whether the move was meant to be temporary, or what should prompt its reversal now that the Central Bank of Nigeria has begun cutting its policy rate.
A written statement still allows a change of course, provided any move outside the agreed ranges is made deliberately, with a recorded reason, and by the person the document names as having authority to make it. It also records how quickly a decision is expected, so that recommendations are acted on while they still apply.
A written standard outlasts any one person's memory
The reasoning behind a portfolio should not live in one person's head alone. When the principal is unavailable, through illness, incapacity, or death, a spouse, a sibling, or an executor inherits statements from 4 banks and no explanation. The statement is that explanation. When assets sit with several banks and custodians across jurisdictions, it is the standard against which consolidated reports are read. When the client changes advisors, it carries the reasoning across.
That value depends on the document staying current. It should be reviewed at least once a year, and again whenever the client's position changes materially: the sale of a business, an inheritance, a marriage, a divorce or bereavement, a relocation, or a child's admission to university abroad. Each of these alters the objectives at the top of the document, and every provision beneath them follows from those.
This article is for general information only and does not constitute investment, tax, or legal advice. Specific circumstances require advice from appropriately qualified professionals. WealthHat Advisory Limited is a Corporate Investment Advisor licensed by the Securities and Exchange Commission of Nigeria (Registration No. 2032).
Written by Damilola Alonge
Principal Wealth Advisor, WealthHat
Published 12 November 2026
