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NEW QUESTION: 3
Sara Robinson and Marvin Gardner are considering an opportunity to start their own money management firm. Their conversation leads them to a discussion on establishing a portfolio management process and investment policy statements. Robinson makes the following statements:
Statement 1;
Our only real objective as portfolio managers is to maximize the returns to our clients.
Statement 2:
If we are managing only a fraction of a client's total wealth, it is the client's responsibility, not ours, to determine how their investments are allocated among asset classes.
Statement 3: When developing a client's strategic asset allocation, portfolio managers have to consider capital market expectations. In response, Gardner makes the following statements:
Statement 4: While return maximization is important for a given level of risk, we also need to consider the client's tolerance for risk.
Statement 5: We'll let our clients worry about the tax implications of their investments; our time is better spent on finding undervalued assets.
Statement 6: Since we expect our investor's objectives to be constantly changing, we will need to evaluate their investment policy statements on an annual basis at a minimum.
Robinson wants to focus on younger clientele with the expectation that the new firm will be able to retain the clients for a long time and create long-term profitable relationships. While Gardner felt it was important to develop long-term relationships, he wants to go after older, high-net-worth clients.
In addition to Statement 6, an appropriately developed investment policy statement is least likely to address which of the following elements?
A. Barriers to short-term strategy shifts driven by panic or overconfidence stemming from portfolio performance or changes in market environments.
B. Assurances of minimum returns so clients will be better able to ensure their financial goals are met over the long run.
C. Transportability so as to minimize any disruptions if new managers assume responsibility for the portfolio.
Answer: B
Explanation:
Explanation/Reference:
Explanation:
Investment policy statements should be transportable, foster discipline, and discourage short-term strategy shifts. (Study Session 18, LOS 68.d)

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