Discretionary Portfolio Management

What is discretionary portfolio management?

When you engage with a discretionary portfolio manager, you agree to a mandate to which your portfolio will be managed. This discussion is often wide-ranging; your investment manager will consider your broader financial circumstances and investment objectives and lay out a proposal to help achieve these goals.  

The agreed mandate will usually set out the risk level you are willing and able to undertake and a target asset allocation, such as the mix between equities and bonds, as well as other factors like constraints to the portfolio that you wish to impose, perhaps for tax considerations or investment preferences.

The discretionary portfolio manager then has the freedom to actively manage and make changes to your investments, whilst remaining in line with these pre-agreed boundaries, without needing your approval for every change, trade and transaction.  

The advantage of this is that your investment manager’s sole focus is keeping up with global events that can impact financial markets, considering investment opportunities and positioning client portfolios to react to the wider world. You benefit from the investment manager’s experience and expertise and do not need to worry about managing your portfolio day-to-day, saving you time for other priorities

Benefits of discretionary portfolio management:

• Leverage market opportunities in an active, timely and decisive way
• Free up time by delegating the day-to-day management of your investments
• Consistent monitoring of investment markets and performance
• Your portfolio is managed within agreed risk parameters which are regularly reviewed

What is advisory portfolio management?

Where discretionary portfolio management puts the day-to-day management of a portfolio in the hands of a skilled team, advisory portfolio management puts the decisions firmly in the hands of the investor. It is often used by investors interested in the details, who like to keep abreast of economic events and financial markets. 

Through Advisory portfolio management, a team will periodically review your portfolio (typically annually) and put forward a proposal (advice) for you to make adjustments if required. They would send you all of the necessary documentation to review their proposals, and if you wished to go ahead, you would need to give your authorisation before this can happen.  

This puts the control of the portfolio firmly in the hands of the investor but can result in delays between the advice being given and the trades being executed. In fast-moving markets, this can sometimes mean missed investment opportunities.

Benefits of advisory investment management:

• Greater control over your portfolio
• Gain insights and expertise from your investment manager

Execution-Only Investing

Execution only investment management does not include any advice. A team executes your strategy and are not usually authorised to give you any advice or guidance. You would be responsible for researching the investments, conducting your due diligence and monitoring both markets and your portfolio on an ongoing basis.

Benefits of advisory investment management:

• Total control over your portfolio
• The ability to react quickly to market movements

Arbuthnot Latham offers long-term management. Our service is designed to meet your income and growth goals within an agreed level of risk.