Why This Distinction Matters
When working with a wealth manager, one of the earliest – and most consequential – decisions you’ll face is whether to opt for discretionary portfolio management or an advisory mandate. The difference lies in who makes the investment decisions and how involved you wish to be.
Discretionary Portfolio Management
Under a discretionary mandate, the portfolio manager is delegated investment decisions. Within pre-defined parameters—such as risk profile, investment strategy, and asset allocation—the manager acts autonomously and without the need for prior consent on individual trades.
This is often the preferred route for investors lacking the time, inclination, or expertise to make day-to-day investment decisions. It also allows for quicker reaction times in volatile markets and removes emotional biases.
Advisory Investment Services
Advisory mandates, by contrast, preserve the client’s decision-making authority. The wealth manager provides recommendations, research, and market insight, but the final decision rests with the investor.
This model suits investors who wish to stay actively involved in their portfolio, seek to learn from their advisor, or maintain a higher degree of oversight and control.
Comparison at a Glance
| Aspect | Discretionary | Advisory |
|---|---|---|
| Decision-making | Portfolio manager | Client |
| Client involvement | Low | High |
| Execution speed | High | Dependent on client availability |
| Best for | Busy professionals, delegators | Engaged investors, hands-on decision makers |
Who Should Choose What?
There is no one-size-fits-all answer. Discretionary management may be ideal for an entrepreneur frequently travelling or a family office managing significant complexity across jurisdictions. Advisory services may better suit a financially savvy investor who values personal oversight and strategic involvement.
Many clients opt for a hybrid setup: core discretionary management complemented by advisory oversight in specific asset classes or bespoke strategies.
Open Architecture Is Crucial
Regardless of the mandate type, ensure your wealth manager offers an open architecture platform. This ensures:
- Access to a broad range of third-party products
- Product selection based on merit, not internal sales pressure
- Greater transparency and better alignment with your interests
Further Reading
- Pricing of Advisory vs. Discretionary Wealth Management Services
- Investment Access: A Fair Chance?
- Open Platform Advantage in Independent Wealth Management
Discretionary vs Advisory: Conclusion
The choice between discretionary and advisory wealth management depends on how involved you wish to be, how much time you can realistically commit, and the degree of autonomy you’re comfortable with.
A well-structured relationship with a transparent, client-centric wealth manager – ideally offering both models within an open architecture framework – allows flexibility as your financial situation evolves.
If you’re unsure which approach is right for you, it may be worth exploring in parallel or consulting an independent wealth management expert for a second opinion.
