Creating an Investment Policy Statement for a Moderate Risk Client

John and Mary Smith, a married couple in their early 50s, are seeking guidance on their investment strategy as they prepare for retirement in the next 10 to 15 years. Their current asset allocation consists of 60% equities and 40% fixed income, but they are considering realigning their portfolio to better meet their longer-term objectives. They have two children, both in college, and expect significant education expenses over the next few years. John is a senior executive earning $200,000 annually, while Mary works part-time as a consultant, generating an additional $50,000 per year.

Their investment objectives include maintaining capital preservation, generating income to support their children’s education, and achieving a net worth of $2 million by retirement. They have a risk tolerance of moderate, with a preference for strategies that balance growth with capital preservation. They also adhere to socially responsible investing principles and wish to ensure that no more than 20% of their portfolio is allocated to companies involved in fossil fuels.

Your task is to create a comprehensive Investment Policy Statement (IPS) for the Smiths that clearly outlines their investment goals, risk tolerance, asset allocation, and any constraints. You must justify the recommended asset allocation and strategies, including how these will facilitate their objectives while considering their ethical investment preferences.