Most clients sign a discretionary investment mandate after a good conversation and a short read. The conversation is the part they remember. The document is the part that governs the next ten years.
So let me walk through the clauses one by one, and where the sentences that matter tend to hide.
If you are still deciding between delegating and approving each trade, start with our comparison of discretionary and advisory mandates. This piece assumes you have chosen, and now have to sign something.
What a Discretionary Investment Mandate Is, in Legal Terms
A discretionary investment mandate is a power of attorney with limits attached.
You grant your manager authority to buy and sell within a defined boundary. Crucially, you do not transfer ownership. The assets stay in your name at the custodian, and in a tri-party arrangement the manager never touches the money itself.
Everything interesting therefore sits in how the contract draws that boundary.
The Clauses in a Discretionary Investment Mandate
| Clause | What it decides | What to check |
|---|---|---|
| Reference currency | The currency your performance is measured in | That it matches where you actually spend |
| Investment strategy or risk profile | The overall shape: conservative, balanced, growth | That the label matches the ranges below it |
| Permitted asset classes | What may enter the portfolio at all | Whether structured products, private markets and crypto are in or out |
| Tactical ranges | How far the manager may deviate from the strategy | Wide ranges mean wide outcomes |
| Restrictions | What is excluded on principle | Single names, sectors, countries, your employer’s shares |
| Benchmark | What performance is compared against | That it reflects the strategy, not the best-looking index |
| Use of own products | Whether the manager may buy its own funds | The single most revealing clause in the document |
| Fees and retrocessions | What you pay and who else gets paid | Whether third-party payments are disclosed and surrendered |
| Reporting | What you receive and how often | Quarterly is standard; monthly is available |
| Review cycle | When the strategy gets revisited | Annually at minimum, plus on life events |
| Termination | How you leave | Notice period, transfer costs, who pays them |
The Strategy Paper Behind the Discretionary Investment Mandate
Clients read the discretionary investment mandate and skim the annex. In practice it should be the other way round.
The strategy document sets the ranges, and ranges decide outcomes. A balanced profile with equities permitted between 30 and 70 per cent is not one strategy; it is two, and you will not know which one you own until a difficult year arrives.
Similarly, write the restrictions down. If you sit on a board, hold employer shares or simply refuse to own a sector, that belongs in writing rather than in somebody’s memory. Memories change employer.
The Discretionary Investment Mandate Clause Most People Miss
In particular, look for the sentence permitting the manager to invest in products it manufactures or distributes.
Managers rarely hide it, and almost never explain it. Yet it determines whether your portfolio draws on the whole market or on one institution’s shelf. Our comparison of open architecture and proprietary products explains why that difference compounds, and the overview of bankable investment products shows how wide the alternative actually is.
Ask the second question too. If the manager may use its own products, does it surrender the retrocessions? Swiss case law has been clear on this for years, but clarity in a courtroom is not the same as clarity in your contract.
What a Discretionary Investment Mandate Does Not Promise
A discretionary investment mandate does not promise a return. It does not promise to beat the benchmark. It does not promise you will be called before a decision.
What it does promise is process: that decisions stay inside the agreed boundary, that the manager acts in your interest, and that you receive an account of what happened. FINMA supervises how firms run that process.
Clients who expect an outcome are disappointed. Clients who expect a process are usually well served.
Before You Sign
First, read the ranges before the prose. Then ask what a bad year looks like inside those ranges, in francs rather than percentages.
Then check the fee clause against the pricing of advisory and discretionary services generally, and against what Swiss private banks charge. Ask who else earns something when a position is bought.
Finally, ask what happens if you want to leave in eighteen months. The answer tells you a great deal about the relationship you are entering, particularly for larger portfolios where transfer costs stop being trivial. And if you are still unsure which temperament the mandate should reflect, our Anlegertyp-Quiz is a reasonable starting point.
The Document Outlives the Conversation
Remember that the person who sold you the mandate may move firm within three years. The relationship manager after that will read the contract, not the meeting notes.
So write the mandate for that person. A discretionary investment mandate is not paperwork around a relationship. On a difficult day, it is the relationship.
