Question

The instructor will assign you a scenario that includes a client's pertinent personal and financial information. Using your client's information and what you have learned in this course, develop an investment policy statement for your client, offer recommendations for the client's portfolio, and provide a justification for the recommendations presented. The policy statement should be 500-750 words and must include the following information:

1. A detailed explanation of the investment policy statement, including the investment objectives for the portfolio, based on the unique needs and preferences of the client.
2. Description of any investment constraints, liquidity needs, and the client's time horizon.
3. A justification of each of the investment recommendations you will make to the client.

Here is the scenario to be considered:

Client is a 70-year-old retired entrepreneur, active and in excellent health, with no children. He continues to hold a substantial number of shares in a business he founded, the total value of which is $25 million. In addition to the private company shares, he has $10 million cash, $5 million stocks, $5 million municipal bonds, $6 million commercial property fully leased, and $1 million home. With no children surviving him, he intends to leave his entire estate to a research foundation seeking a cure for the disease that ended his wife’s life.

Answer 1

I am giving some hints and points which you can use to draft the detailed policy statement.

Risk objective	The client has been an entrepreneur, that shows his ability and willingness to take risk. But he is now 70 years of age and retired, therefore at present, he must have average to low ability and willingness to take risk.
Return objective	The client has ample wealth in his name and returns wise he is sufficient. He does not have any dependents or family. He might just also want to maintain the principal amount of wealth adjusted for inflation.
Liquidity Constraint	The client does not have any such major liquidity requirements from the portfolio. He will need living expenses from the portfolio beacuse he is retired and not actively earning.
Legal constraints	The client does not face any such legal contraints except for any legal issues that might arise when the assets are transferred to charity.
Time constraint	The client is already into retirement and 70 years of age. Assuming that he will live till 85/90 years, it is a single period long time horizon. Therefore, the portfolio can recover from short term losses.
Tax constraints	No such tax constraints are applicable, except the capital gains tax and and charity tax that might be payable by the research foundation.
Unique constraints	The client has a major concentration of wealth in his own private company suggesting an emotional bias towards the company. Diversification shall be advised. Further, the portfolio has $10 million idle cash that can be invested into stocks and bonds.