Discretionary Portfolio Management

Discretionary Portfolio Management
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The world of investment can be a confusing one for the uninitiated but for those of us who have neither the time nor the inclination to monitor the markets and select our own investments, using the services of a discretionary portfolio management specialist can significantly reduce the investment headache. This kind of service is for clients who want to hand over the responsibility for managing investments to an expert. He or she will begin by sitting down with you to work out what you want to achieve from your investments, before constructing a portfolio to suit your requirements. Your investment manager then makes all the day-to-day decisions on your behalf, keeping inside a framework agreed with you at the outset.

Depending on your particular requirements, your portfolio will typically include a combination of equities (individual company shares), managed funds (unit trusts, investment truts and open ended investment companies), fixed interest securities (government gilts and corporate bonds), property funds and cash. In addition to these ā€œcoreā€ investment categories, some managers also include ā€œalternative investmentsā€ such as hedge funds and AIM (Alternative Investment Market) stocks. For smaller portfolios, or those where the client prefers the additional diversification, investment may be exclusively through managed funds.

Any individual or organisation with a reasonably significant sum to invest can use a portfolio management service. Minimum investment levels vary but can be as low as Ā£150,000 for a portfolio of individual stocks and shares of Ā£50,000 for a portfolio consisting purely of managed funds.

As the global investment environment has become more complex, the need for investment managers to respond quickly to situations has become increasingly important. Market intelligence frequently leads managers to make decision to buy or sell stock on behalf of clients before prices fully react. With a discretionary portfolio managements service, your investment manager is able to implement investment decisions quickly and efficiently on your behalf, as well as involving you in the minimum of investment administration and burdensome paperwork.

Your portfolio will benefit from the ongoing attention of a professional investment manager, who will ensure that suitable opportunities are capitalised on as they arise, rather than waiting until a given review date - when market conditions could well be less favourable. Of course, the most suitable course of action may often be to take no action at all so using a discretionary service will not necessarily result in high levels of dealing activity. In exercising his/her discretion, your manager may only select investments for your portfolio which he/she believes to be suitable in light of your particular investment objectives and attitude to risk.

In addition to this, some managers allow you to limit their discretion by specifying certain stocks of your existing portfolio which should not be sold without prior consultation - for example those where there is a long-standing family connection. Alternatively, you may choose to impose certain restrictions for example to avoid investing in particular areas of the world or in certain sectors of the stock market. Naturally, you should be aware that the fewer restrictions you place on your manager, the greater his/her ability will be to manage the portfolio effectively.

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