How do I check a client's portfolio for drift from their IPS?
Compare current allocations and concentrations against the bands written in the investment policy statement — and do it on a schedule, not just at the annual review, so breaches surface the same day instead of next quarter.
Short answer: Portfolio drift is the gap between a client's current allocation and the targets and limits set in their investment policy statement (IPS). You check it by comparing each holding and asset-class weight against the IPS bands — ideally continuously, so a breach is caught when it happens, not at the next review.
What you're actually comparing
A useful drift check looks at three things against the IPS:
- Asset-allocation bands. Is equity/fixed-income/cash still inside the target ranges?
- Single-position concentration. Has any one holding grown past its limit (e.g., a 7% single-stock cap)?
- Sector or factor tilts. Has market movement quietly pushed the book away from the intended profile?
Why timing matters
Drift discovered at the annual review is drift that's been live for up to a year. A position that breached its concentration limit in Q1 and surfaces in Q4 is a suitability conversation you should have had three quarters earlier.
The manual way vs. the monitored way
Manually, this means pulling the holdings, rebuilding the allocation, and eyeballing it against the IPS — per client, periodically. It's accurate but slow, so in practice it happens rarely.
The alternative is to monitor allocations against each household's IPS bands automatically and surface only the breaches. The advisor's attention goes to the handful of accounts that actually moved, not to re-deriving every book by hand.
Tie it back to suitability
Drift isn't just a portfolio metric — it's a suitability signal. A book that has wandered outside its IPS is, by definition, drifting from the profile you documented as appropriate. Catching it early is both better service and a cleaner compliance posture.
AdvisorIQ checks every household against its IPS bands daily and surfaces the breaches — drift caught the same day, not next quarter.
Request access →General information, not legal or compliance advice.
- How often should I check for portfolio drift?
- More often than the annual review. Continuous or at least monthly monitoring against IPS bands catches breaches while they're small; quarterly or annual-only checks let drift run for months.
- What counts as a drift breach?
- Any holding or asset-class weight that has moved outside the target range or limit written in the client's IPS — for example, an allocation band exceeded or a single-position concentration cap breached.
- Is portfolio drift a compliance issue or just performance?
- Both. Drift outside the IPS is a suitability signal, because the portfolio no longer matches the documented profile — so it has compliance relevance, not just performance relevance.
Keep reading
All q&a →Does the SEC Marketing Rule cover AI-generated content?
Yes — the Marketing Rule is about what you communicate to clients and prospects, not how you drafted it. AI-written marketing is held to the same substantiation and fair-and-balanced standards as anything else.
What records must an RIA keep when AI informs a recommendation?
The same records you'd keep for any advice that forms the basis of a recommendation — plus the practical reality that AI output needs to live in a retainable system, not a consumer chat history.
Can I use AI to research client investments and stay compliant?
Yes — if the AI cites its sources and the work is retained as a record. The compliance risk isn't AI itself; it's using a tool that can't show its sources or keep a books-and-records trail.