A financial advisor is constructing an investment policy statement (IPS) for a Canadian client whose primary objective is long-term growth, with a high risk tolerance and a 20-year time horizon. The advisor is considering different asset allocation models. Which model is most appropriate for a client with this profile, emphasizing long-term growth and high risk tolerance?

Question: A financial advisor is constructing an investment policy statement (IPS) for a Canadian client whose primary objective is long-term growth, with a high risk tolerance and a 20-year time horizon. The advisor is considering different asset allocation models. Which model is most appropriate for a client with this profile, emphasizing long-term growth and high risk tolerance?

Answer options:

• A fixed-income heavy model with a low standard deviation of returns.
• An allocation primarily focused on Canadian money market instruments. ✅ A growth-oriented model with a higher allocation to equities and potentially alternative investments.
• A balanced model with equal weighting between Canadian equities, U.S. equities, and bonds.

Correct answer: A growth-oriented model with a higher allocation to equities and potentially alternative investments.

Explanation: For a client with a long-term growth objective and high risk tolerance, a growth-oriented asset allocation model with a significant weighting in equities and potentially alternative investments capable of generating higher returns is most suitable. This aligns with their capacity and willingness to take on more risk for greater potential reward.