Investment Policy Statement for a Young Family

John and Sarah, a married couple in their early 40s, have two children aged 10 and 12. Together, they earn an annual income of $300,000. They have a combined portfolio worth $1.5 million primarily invested in a mix of equities and fixed income. They aim to purchase a vacation home in ten years worth approximately $800,000 and wish to fund their children’s education in the future. John is risk-averse, favoring capital preservation, while Sarah is open to moderate risk, preferring growth potential. Both prioritize sustainable investing and desire to include socially responsible investments in their portfolio.

Their current asset allocation is 70% equities and 30% fixed income. They have not yet formally drafted an Investment Policy Statement (IPS). As their private wealth manager, develop a comprehensive IPS for John and Sarah. Your response should include sections on the investment objectives, risk tolerance, time horizon, liquidity requirements, tax considerations, and asset allocation strategy. Provide a rationale for your recommendations that aligns with their financial goals and values.