One of the most essential decisions in wealth management in Switzerland is whether to choose a discretionary mandate or an advisory mandate. The key difference lies in who makes the investment decisions and how involved you want to be. This article offers a clear comparison, highlights the advantages and disadvantages, and explains which approach suits different investor needs.
Discretionary Portfolio Management
In a discretionary mandate, the portfolio manager makes investment decisions on your behalf. You define your risk profile, strategy, and objectives, and the manager acts within these parameters. This model is ideal for investors who prefer a hands-off approach, want faster reactions in volatile markets, and seek to avoid emotional decision-making.
Pros of Discretionary Management
- Professional management and quick execution
- No daily time commitment for the client
- Reduces emotional bias in decision-making
Cons of Discretionary Management
- Higher fees due to the active involvement of the manager
- Less control – decisions are delegated
Advisory Investment Services
An advisory mandate keeps the final decision in your hands. The wealth manager provides research, recommendations, and market insights, but you approve each trade. This approach works well for investors who want oversight, prefer to stay actively engaged, and value learning from their advisor.
Pros of Advisory Management
- Complete control over all investment decisions
- Lower fees compared to discretionary mandates
- Close collaboration with the wealth manager
Cons of Advisory Management
- Slower execution due to approval requirements
- Time-intensive for clients who must review all trades
Comparison at a Glance
| Aspect | Discretionary | Advisory |
|---|---|---|
| Decision-making | Dependent on the client | Client decides |
| Client involvement | Low | High |
| Execution speed | Fast | Dependent on client |
| Best suited for | Busy professionals, delegators | Engaged, hands-on investors |
Hybrid Approaches for HNWI and UHNWI
Many HNWI and UHNWI clients use a hybrid approach. They rely on discretionary management for the core portfolio but retain advisory input for specific asset classes or alternative investments. This combination allows for efficiency while maintaining control where it matters most.
Investor profiles play a key role in choosing the right model. Learn more in our article about which approach fits different investor types.
The Importance of Open Architecture
Regardless of the mandate type, choosing a wealth manager with an open architecture platform is essential. Open architecture ensures access to third-party products, objective selection based on quality rather than sales pressure, and greater transparency. This alignment protects clients from hidden conflicts of interest and strengthens trust.
Conclusion: Discretionary vs Advisory
The choice between discretionary and advisory investment depends on how much time you can dedicate, your appetite for control, and your trust in professional decision-making. Discretionary mandates deliver speed and convenience, while advisory mandates provide power and flexibility. With a transparent, client-focused wealth manager, both models can be combined to suit evolving financial needs. For further insights, explore our related article on advisory vs discretionary fees.
Fees are another critical factor. For a detailed breakdown, see our guide to advisory vs discretionary fees.
