An institutional IPS (the kind written for a pension fund or an endowment) answers to a mandate: a stated purpose (fund future pension payments; support a university in perpetuity), a board, an actuarial liability schedule, and, usually, no single human being whose retirement, marriage, or mortality changes the answer. A private-client IPS answers to a person, and persons complicate every one of the institutional document's clean assumptions. The time horizon is not "perpetual" or "actuarially modeled", it is the specific year this specific person plans to stop working, revised every time their plans change. The liquidity need is not a smoothed capital-calls schedule, it is a home down payment two years out, a parent's medical bills that might land tomorrow, a business owner's need to keep six months of payroll on hand. And the "unique circumstances" section, which in an institutional IPS might hold one line about a values-based exclusion policy, is where a private-client IPS carries the concentrated stock position, the closely-held family business, the client's stated refusal to ever invest in a specific sector for reasons that have nothing to do with expected return.
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What are the two objectives and five constraints?
The practical consequence is that a private-client IPS is built from a five-constraint framework layered under two objectives, and every one of the five constraints below deserves its own careful paragraph in the document, not because the framework itself is exotic (industry practice everywhere calls it out this way; it is a restatement, not an invention), but because each constraint is a place where a lazy IPS quietly lies to its own portfolio. The two objectives: what return does this portfolio need to earn (the return objective), and how much risk can and should it carry to earn it (the risk objective). The five constraints: the client's time horizon, their liquidity needs, their tax circumstances, the legal and regulatory environment they sit inside, and their unique circumstances, everything that does not fit the first four boxes but still binds the plan. Hold this structure the way you hold a balance sheet's two sides: it is not decoration, it is the thing that keeps the plan honest, because a return objective without an honestly-stated liquidity constraint is a plan that will force a bad sale at exactly the wrong moment, and a risk objective that only asks "how do you feel about risk" without separately asking "can you actually afford this risk" is a plan built on the answer to the wrong question.