The Complete Outline for the Individual IPS
The IPS material matters a lot. This is true in terms of raw number of points and in how it impacts the overall structure of the CFA Level 3 Curriculum. The goal of this post is simply to call attention to some relevant areas and to link you to deeper posts explaining each. Pay attention to all of it, it's all worth points on exam day.
Private Wealth Management and the Individual IPS
The Investment policy statement, and the constraints and risk/return parameters that this investment framework introduces, are vital to the CFA L3 exam.
It is perhaps the cornerstone to the morning section. Every year, without fail, the individual IPS material is worth at least 12 points, often more. And every year, without fail, it is a problem that trips up hundreds of Candidates either because they fail to earn sufficient points or because they fail to properly manage their time with these types of problems.
Consider yourself warned.
Key Testable Concepts from the IPS Material
To understand how the material is tested, start with this quick overview.
RR-TTLLU will become your friend for the next few months.
For the exam itself you will need to read a long passage and:
- Return - solve for an investor’s return requirements
- Risk Tolerance - Identify whether they are below average, average, or above average in terms of risk tolerance. See this post for more
- Constraints - Identify and justify that risk tolerance based on their unique constraints
- Picking a Portfolio - Perhaps pick a suitable portfolio for the investor. See our post “The art of eliminating unsuitable portfolios”
The links above should help you get an overview of what to expect.
In terms of our full Guided notes, the relevant material or Problem Set #2 consists of Study Session 5 and 6 on Private Wealth Management. This is pages 75 – 141, although for problem set #2 the most vital material lies in Reading 10 on managing individual investor portfolios. We also have several videos covering the material.