Discretionary portfolio management is a form of investment management in which buy and sell decisions are made on behalf of the client by a portfolio manager or investment advisor. The client grants the manager full discretion to manage their investment portfolio, which means that the manager does not need to seek approval before executing transactions. This approach is ideal for investors who lack the time or expertise to manage their investments and prefer to entrust their portfolios to professionals.
Does this sound like something that would appeal to you? Before pressing ahead, however, it’s important to think through both the potential benefits and drawbacks of this approach.
The benefits of Discretionary Portfolio Management
Clearly, if you are going to leave investment decisions in the hands of a professional manager then you will be benefitting from their expertise and resources. No matter how great your understanding of the markets, if you are not able to focus full time on your investments, you will always be at a disadvantage especially if you want your investments to be actively managed, as would be the case with discretionary portfolio management.
Coupled with the expertise, the time you save by opting for discretionary portfolio management will also be a big win. That’s not only because all the analysis and decisions will be in the hands of the manager but also because you can receive updates on the performance of your portfolio through regular reports, avoiding the need to regularly monitor progress yourself.
Finally, despite leaving the buy and sell decisions to a fund manager, you will still have a lot of input in the investment strategy adopted. This is because portfolios can be tailored to meet the financial goals, risk tolerance, and investment preferences of the client.
What about potential drawbacks?
As just highlighted, opting for discretionary portfolio management does not mean you have no control over the investment strategy. But, of course, this control is limited as once the strategy is set, the fund manager is the one who takes decisions. This can prove difficult for some investors to accept.
There is also the question of costs as, inevitably, such a service will attract some fees. At MeDirect, we have used technology to make MeManaged, our discretionary portfolio management, fully digital. This has enabled us to offer the service with a minimum investment of just €100 and an annual management fee of just 1.2 per cent.
Of course, if you are going to opt for discretionary portfolio management, you need to trust the fund manager, so it is always imperative that you work with someone who has an excellent reputation and track record over several years.
Final thoughts of discretionary portfolio management
Discretionary portfolio management offers a personalised investment experience, with professionals handling the complexities of portfolio management. It is a suitable option for those who prefer to focus on their careers or other interests while having their financial assets professionally managed. As with any investment service, it is essential to conduct thorough research and choose a trusted manager to handle your discretionary portfolio.
When investing you may lose some or all of the money you invest. The value of your investment may go down, as well as up. Any income you get from this investment may go down, as well as up. A commission or sales fee may be charged when investing in this product. This product may be affected by changes in currency exchange rate movements thereby affecting your investment return therefrom.
MeDirect Bank (Malta) plc, company registration number C34125, is regulated by the Malta Financial Services Authority and is licensed to undertake the business of investment services under the Investment Services Act (Cap. 370).