Portfolio management services can be of great importance to individuals looking to grow, optimise and protect their assets. Portfolio managers have two approaches: discretionary and advisory services, which accommodate distinct needs and preferences. In this guide, we provide an overview of each to help you determine which is more suitable for your investment needs.
Discretionary portfolio management
Discretionary asset management is commonly defined as a strategic approach to portfolio management, which delegates decision-making to established investment professionals. It achieves this by entrusting portfolio managers with the authority to align tactical decisions using their acumen, with a core asset management strategy.
This service is preferred by clients who lean towards a hands-off approach and who have full faith in their portfolio manager to work on their behalf and in their best interests. This strategy takes into account your desired level of risk and offers numerous benefits. You can be sure you will receive expert guidance, and it is, therefore, an appealing option for people looking for a professionally managed investment schedule.
Discretionary portfolio managers tend to be seasoned professionals with an in-depth understanding of investment strategies and financial markets. Their role means leveraging their experience to maximise returns while minimising risk. With their extensive networks, they will be able to access and navigate a broad range of global markets to identify shrewd investment opportunities.
By adjusting asset allocations according to economic trends and market conditions, they are also expertly placed to maintain a well-positioned portfolio, and respond to volatility accordingly with a disciplined approach. They will tailor investment strategies, and, in particular, diversify assets, in order to align with clients’ goals and risk tolerance. Moreover, they will ensure portfolios are optimised for tax efficiency.
Having confidence in their ability to act means less personal stress and emotional bias for clients. It also means their time is freed up, as they will not have to constantly monitor the markets. Even when not involved in daily decisions, the process still ensures clients have access to comprehensive reports that offer full transparency and accountability.
Advisory portfolio management
Advisory portfolio management is the provision of professional and personalised investment guidance. This service enables private individuals to draw on professional expertise before making any adjustments to their portfolios.
An advisory service is a collaborative approach in which the portfolio manager offers recommendations, but cedes the final decision to the client on how to proceed. This path is more suitable for individuals who seek a greater involvement in their chosen investment strategy while still reaping the benefits of expert advice, often focused on a specialist area.
Advisory services formulate customised investment plans that will ultimately depend on a client’s specific goals. Irrespective of whether the objective is retirement, an investment income or wealth preservation, the portfolio is tailored to meet the client’s aspirations while being continually adapted to factor in shifting economic patterns. With this arrangement, the client is an active participant in decision-making, and may choose to approve, amend or not accept their portfolio manager’s suggestions.
This flexibility extends to individual financial situations, and clients can decide how their portfolios are structured, based on unique personal circumstances or more global factors. Portfolio management services will offer access to a multitude of investment options, such as exclusive funds, hedge funds, commodities, private credit/equity or structured notes, as well as particular regions.
Because advisory-only asset management authorises the client to make decisions, it demands a serious degree of emotional discipline, financial literacy and time commitment, as well as a solid understanding of diversification and tax efficiency. A continuous improvement in performance gained by managing portfolios over time is referred to as the ‘learning effect’. This helps clients to better assess their financial objectives and level of risk tolerance, drawing on external counsel while keeping ultimate control of their own assets.
There are different factors to weigh up before deciding between a discretionary or advisory approach. What is your knowledge of the financial markets? What is the learning effect? How much time do you have to spare and how reachable are you likely to be? Each approach has its advantages and disadvantages, but ultimately your direction will depend on your unique financial strategic needs. To discuss your options for asset management in Cheshire, get in touch with Hartey Wealth Management today to set up a consultation.
