Discretionary vs Advisory Mandate: Key Differences

Choosing the right investment approach is one of the most important decisions in wealth management in Switzerland. Some investors want full control over every trade, others prefer to delegate to experts. So which model fits you — a discretionary mandate or an advisory mandate? Below we compare both in detail. We look at how they work in the Swiss context, what they cost, and which investor profile benefits most.

What is a Discretionary Mandate?

Under a discretionary mandate, you delegate investment decisions to your wealth manager. Banks and asset managers label the same service differently – discretionary portfolio management, discretionary investment management or, mainly in the UK, discretionary fund management . In Switzerland the legal substance is identical: a written mandate that authorises the manager to invest on your behalf within agreed limits. You define the goals, the investment strategy and your risk tolerance in an investment policy statement. The professionals then execute it on your behalf.

On paper, that delegation covers the investment universe, risk limits, fees and termination rights. The details are in our guide to what is actually written in a discretionary investment mandate. They monitor markets daily, rebalance the portfolio and react to volatility without needing your sign-off for each transaction. This frees clients — especially busy HNWIs and UHNWIs — from day-to-day investment tasks while keeping their long-term objectives on track.

Pros of a Discretionary Mandate

• No effort required – experts handle all investment decisions within your agreed framework.
• Fast market reaction – the manager can act immediately, with no approval delays.
• Professional, disciplined risk management – the portfolio stays aligned with your profile.

Cons of a Discretionary Mandate

• Higher fees – active, hands-on management typically costs more.
• Less direct control – you hand over day-to-day decision-making authority.

What is an Advisory Mandate?

An advisory mandate keeps you in control. The same service is often marketed as advisory portfolio management. Whatever the label, the decisive point is that every order needs your approval. Your wealth manager provides research, strategy and concrete recommendations, but you approve every transaction before it goes through. This suits investors who enjoy being involved and want full oversight of their portfolio. It combines expert guidance with personal decision-making authority. It also means the responsibility for acting (or not acting) ultimately rests with you.

Pros of an Advisory Mandate

• You stay in control – no trade happens without your approval.
• Lower fees – costs are typically lower than those of a discretionary mandate.
• Expert insights – you get professional research and ideas before you invest.

Cons of an Advisory Mandate

• Time-consuming – you must review and approve every recommendation.
• Slower reactions – in fast-moving markets, waiting for approval can cost opportunities.

Discretionary vs Advisory mandate: Key Differences at a Glance

What Do Discretionary and Advisory Mandates Cost?

Fees are often the deciding factor, so it helps to understand how they are structured. A discretionary mandate usually carries a single, all-in management fee charged as a percentage of assets under management. In Switzerland this commonly falls in the region of 0.8%–1.5% per year, depending on portfolio size and complexity. An advisory mandate typically has a lower base advisory fee, but each transaction you approve may incur separate costs. An active advisory portfolio can therefore end up closer to a discretionary one in total. The key difference is predictability. Discretionary fees are largely fixed and transparent, while advisory costs depend on how often you trade. For the exact figures that apply to your situation, see our pricing overview.

Expressed in basis points, the usual Swiss ranges look like this. All-in discretionary portfolio management at a private bank commonly costs 80–150 basis points per year. Independent wealth managers typically charge 60–120 bp, with custody of 20–40 bp paid separately to the custodian bank. An advisory mandate usually combines a base fee of 50–100 bp with per-transaction charges. That is why two advisory clients with identical portfolios can pay very different totals.

Performance-fee models lower the base by 10–30 bp in exchange for a share of gains above a hurdle. However, they are only acceptable with a high-water mark. All of these bands fall with size. Above CHF 5 million, all-in rates below 100 bp are realistic. Moreover, above CHF 10 million you can negotiate 50–80 bp. A full breakdown of the underlying categories – custody, transactions, FX and reporting – is in our guide to Swiss private banking fees.

What Happens in Practice at Different Portfolio Sizes?

The theory is the same at every size; the practice is not. Below roughly CHF 1 million, most banks implement a discretionary mandate through standardised model portfolios or strategy funds. As a result, individual positions are the exception. That keeps costs workable, but it also means little personalisation. At this size, advisory coverage often means campaign-driven product ideas rather than a structured advisory process.

Between CHF 1 and 5 million, individual securities become the norm and the relationship gains substance. You get a named portfolio manager or adviser, a documented investment policy and the first real room to negotiate fees. This is where the choice between the two models genuinely opens up. After all, an advisory mandate only earns its keep if your adviser calls you before the market moves, not after.

From CHF 5 million upwards, discretionary investment management becomes bespoke. Think direct bond positions instead of bond funds, institutional share classes, individual exclusions and consolidated reporting. Advisory clients at this size typically gain access to a dedicated specialist desk. In addition, fee schedules shift from list prices to negotiated basis points.

Above roughly CHF 15–20 million, the setup starts to resemble a small family office. Typical features: several custodian banks, one manager consolidating the whole picture, and a discretionary core with advisory satellites. At that level the mandate label matters less than governance – who monitors the manager, how often, and against which benchmark.

How Are These Mandates Regulated in Switzerland?

In Switzerland, both discretionary and advisory mandates fall under the Financial Services Act (FinSA). Independent portfolio managers are licensed by FINMA and supervised on an ongoing basis by a FINMA-authorised supervisory organisation. Independent portfolio managers must hold a FINMA licence, and all advisers must meet FinSA’s suitability and transparency requirements before advising clients. This regulatory framework protects investors regardless of which mandate they choose. It also means a discretionary manager carries a formal duty to act within your agreed risk profile. In contrast, in an advisory relationship the final responsibility for each decision remains with you. An independent, FINMA-licensed wealth manager gives you an adviser whose incentives align with yours, not with a bank’s product shelf.

Since 2020 the Financial Services Act (FinSA) has drawn a sharp line between the two services. Portfolio management – the discretionary form – and comprehensive investment advice that looks at the whole portfolio both require a suitability assessment. The provider must understand your financial situation, knowledge, experience and objectives, and document a risk profile. Advice on isolated transactions triggers only the lighter appropriateness test, and pure execution-only business requires neither.

FinSA also segments clients as retail, professional or institutional. Above certain wealth thresholds, clients can opt out of parts of the protection. Independent portfolio managers additionally need a FINMA licence and affiliation with a supervisory organisation. These rules have been fully in force since the FinIA transition period ended in 2022. Swiss case law requires providers to disclose retrocessions and, absent a valid waiver, pass them on to the client. In practice this means more paperwork at onboarding, and considerably better documentation if something later goes wrong.

Which Investor Profile Suits Each Approach?

The right choice depends on your time, temperament and involvement. A few typical profiles:

• The busy entrepreneur or executive who has little time and wants a professionally managed portfolio usually chooses a discretionary mandate.
• The hands-on, cost-conscious investor who enjoys following markets and wants to approve every move tends to prefer an advisory mandate.
• Many HNWIs and UHNWIs combine both. For example, they use a discretionary mandate for the core portfolio, and advisory services for specialised investments where they want a say.

Finally, learn more about why a personal wealth manager can be the better choice.

How to Decide: Five Questions Before You Sign

Before committing to either model, test yourself on five points. First, response time. When markets fall ten percent in a week, do you want the portfolio adjusted the same day? Or do you want the phone call first? Second, discipline. Will you actually read and answer recommendations? Or will they expire unread in your inbox, turning your advisory mandate into an expensive newsletter? Third, total cost. Compare the all-in basis points of a discretionary mandate against your realistic advisory trading volume, not the base fee alone.

Fourth, documentation. In both models, insist on a written risk profile and investment strategy. FinSA requires it, and it is your main protection in a dispute. Fifth, reversibility. Choose the mandate you can live with for three years. Because circumstances change, confirm up front what switching between advisory and discretionary costs. If the answers point in both directions, the split solution – a discretionary core with advisory satellites – is usually the honest compromise.

Which Investment Style Suits You? Take the Quiz

Not sure which approach is right for you? Try our investor type quiz. Answer a few quick questions and receive personalised recommendations tailored to your goals and risk profile.