Discretionary vs. advisory mandates: who decides what?

You want your assets managed professionally, but face a key question: discretionary or advisory mandate? Both models have their merits, but they differ in decision-making authority, time commitment and cost structure. This article sets out the differences, the strengths and weaknesses of both models, and the questions on which the choice between them turns.

The difference in two sentences

With a Discretionary Mandate, your Wealth Manager decides independently what to buy and sell, within an investment strategy agreed in advance. With an Advisory Mandate, every single transaction remains your decision. Your Wealth Manager provides the analysis and the recommendation.

The difference, then, is not one of quality of service, but of who makes the execution decision. Everything else, from response speed to time commitment to cost structure, follows from that one decision.

Key points at a glance

• Discretionary Mandate: The Wealth Manager makes the individual investment decisions within the strategy agreed with you. That saves you time.

• Advisory Mandate: You make all decisions yourself. Your Wealth Manager provides recommendations. Full control, but greater time commitment.

• Time factor: Advisory requires active involvement and availability; discretionary saves time in day-to-day life.

• Costs: The two models differ in their fee structure; transparency is what matters.

• Everon: FINMA-regulated, portfolios held with established Swiss custodian banks, strategies from its own portfolio management for both mandate types.

What is a Discretionary Mandate?

With a discretionary mandate, you delegate management of your portfolio to a professional Wealth Manager. The manager makes investment decisions independently, within the parameters agreed at the outset. Together you set your investment strategy, define your risk profile, and establish limits. From that point, the Wealth Manager takes over operational management.

In practice this means: the Wealth Manager decides what to buy and sell within the agreed framework, carries out rebalancing, and adjusts the portfolio to market changes without seeking your approval each time. You do not have to attend to day-to-day activity.

Transparency is maintained throughout: you receive regular reports and can check your portfolio status at any time.

Strengths: Discretionary Mandate

A discretionary mandate offers several advantages:

• Time saving: You do not need to be constantly available or attend to operational decisions. Management runs in the background.

• Professional management: Experienced Wealth Managers make decisions based on thorough analysis and market assessment.

• Swift response: When markets move, your portfolio can be adjusted promptly, without waiting for rounds of approval.

• Disciplined approach: Because the strategy is set in advance, it continues to be followed even in nervous market phases, rather than dropped in a moment of panic.

• What it requires: Strategy, risk profile and limits are agreed once, upfront. Individual decisions then run without further consultation.

Weaknesses: Discretionary Mandate

There are also aspects worth considering:

• Less direct control: Decisions are not discussed with you in advance. You learn of transactions after they have been carried out.

• Costs: A discretionary mandate is generally more expensive than an advisory mandate, as the management workload is higher.

• Trust required: You need to be confident that the Wealth Manager acts within the agreed framework. You can follow this through the reporting.

• Tax classification: Private capital gains on movable assets are generally tax-free for individuals in Switzerland. Trading very frequently, however, can tip you into classification as a commercial securities trader, at which point the gains count as taxable income and become subject to social security contributions. How the tax authority classifies an individual case is a matter for a tax advisor.

These drawbacks diminish when you choose a partner who acts transparently and reports regularly.

What is an Advisory Mandate?

With an advisory mandate, you retain full decision-making authority. The Wealth Manager analyses the portfolio, monitors markets, and provides recommendations, yet the final decision always rests with you. Every transaction requires your express approval.

The process works as follows: your Wealth Manager develops proposals for purchases, sales, or reallocations. These are discussed with you, the rationale is explained, and your agreement is sought. Only then is the transaction executed. For the client, this means full control, but also greater responsibility and time commitment.

Every transaction needs your approval, and every recommendation has to be weighed before it is executed. The time commitment is spread across the year rather than concentrated in the strategy meetings.

Strengths: Advisory Mandate

The advisory mandate has different strengths:

• Full control: You decide on every transaction. No surprises, no decisions taken without your knowledge.

• Learning by doing: You gain direct insight into investment decisions and can build your financial knowledge continuously.

• Lower costs: An advisory mandate is often less expensive, as fewer operational tasks are involved.

• Tax timing control: You decide how long to hold positions and how often you trade, keeping in your own hands the very factors that determine whether you trigger commercial securities trader classification.

• What it requires: Availability for every single transaction decision, and enough market knowledge to weigh a recommendation.

Weaknesses: Advisory Mandate

Challenges exist here too:

• Time-consuming: Regular coordination requires time and attention. You must be reachable and ready to make decisions.

• Slower execution: Because every transaction requires your approval, decisions can be delayed. In fast-moving markets, this can be a disadvantage.

• Emotional decisions: Without a systematic approach, there is a risk of being influenced by behavioural biases, such as fear or greed.

• Availability: If you travel frequently or are difficult to reach, staying in touch can become a challenge.

An advisory mandate requires an active commitment of time and disciplined decision-making.

Decision speed and control

The two models diverge most where speed and control pull in different directions.

Speed: With a discretionary mandate, there is no approval step between decision and execution. If a holding falls below an agreed threshold, action can be taken immediately. With an advisory mandate, time passes while you review and confirm the proposal. In calm markets, this makes little difference; in volatile ones, it does.

Control: In return, with an advisory mandate you see every decision before it takes effect. With a discretionary mandate, your control shifts forward and back: forward into the investment strategy and the limits you set in advance, back into the reporting through which you track how it was implemented. Control does not disappear; it simply changes when it applies.

Speed and control cannot both be maximised at once. A discretionary mandate gives more weight to speed, an advisory mandate to ongoing control.

Decision guide: how the two models differ

The two models differ along five questions:

1. How much time does the model require?

Once the strategy is set, a Discretionary Mandate needs little ongoing time. In an Advisory Mandate, every transaction requires your approval and therefore your time.

2. What financial knowledge does the model assume?

In an Advisory Mandate, you assess every proposal yourself; that requires knowledge of asset classes and markets. In a Discretionary Mandate, your input concerns the strategy and the limits, not individual decisions.

3. How much direct control stays with the client?

Your control in a Discretionary Mandate lies in the strategy, the limits and the reporting; in an Advisory Mandate it also covers every individual decision.

4. What availability is needed?

If you are travelling or in another time zone, every transaction in an Advisory Mandate waits for your approval. In a Discretionary Mandate, implementation continues within the limits without checking back with you.

5. Which tax points come into play?

Private capital gains are generally tax-free in Switzerland; what matters is avoiding classification as a commercial securities trader. In an Advisory Mandate, you decide on every transaction and so also on holding period and turnover frequency. In a Discretionary Mandate, both belong in the investment strategy, which is agreed in advance.

Discretionary vs. Advisory: the key differences

Costs and fees

Costs differ considerably between the two mandate types.

Discretionary Mandate: Fees are generally higher, as the Wealth Manager takes over operational management. Typical costs:

• Management fee: Annual charge of between 0.5 and 1.5 percent of assets under management

• Performance fee: Performance-based charge (not always levied)

• Transaction costs: Often included in the management fee

Advisory Mandate: Fees tend to be lower, as less administrative work is involved:

• Advisory fee: Either an hourly rate or a flat fee

• Transaction costs: Often shown separately

In both cases, look at the total cost ratio rather than the base fee alone. Only once you add custody fees, foreign-currency costs, and any product costs do you get the full picture that determines your net return.

Regulatory aspects in Switzerland

Wealth managers in Switzerland require a licence from FINMA (the Swiss Financial Market Supervisory Authority) and are subject to the Financial Institutions Act (FinIA). Their dealings with clients are additionally governed by the Financial Services Act (FinSA), which regulates, among other things, disclosure obligations, the assessment of a service’s suitability, and the disclosure of conflicts of interest.

Custodian bank: In both models, your assets are held with a custodian bank, not with the Wealth Manager itself. If the Wealth Manager acts in your name in dealings with the bank, it needs a power of attorney from you. The power of attorney determines whether the Wealth Manager can also initiate payments to third parties.

Who is liable for what?

The Code of Obligations has no separate contract type for asset management or investment advice. Under Art. 394 para. 2 CO, contracts for work or services that do not fall under a specific contract type are governed by the law of mandate. The mandatee is then liable for the faithful and diligent performance of the business entrusted to them (Art. 398 para. 2 CO). What is owed is diligence, not a particular investment outcome.

Under a discretionary mandate, the manager makes the investment decisions. The manager is liable for keeping to the agreed investment strategy and limits and for implementing them diligently. Under Art. 397 CO, the manager may depart from the client’s instructions only where it is not reasonably possible to ask the client first and it can be assumed that the client would have consented had they known the position.

Under an advisory mandate, you decide on every transaction. The provider is liable for diligent investment advice. The provider documents your needs and the reasons for every recommendation that leads to a purchase or sale (Art. 15 para. 2 FinSA).

Under both mandates, the financial services provider informs the client before the contract is concluded, among other things, about its supervisory status, the general risks of financial instruments, and its economic ties to third parties (Art. 8 and 9 FinSA). It carries out an appropriateness or suitability assessment (Art. 10 to 12 FinSA) and documents the services agreed and provided (Art. 15 FinSA). On request it gives an account, including of the development of the portfolio and the costs (Art. 16 FinSA).

At any time, you can request a copy of your file and of all documents concerning you that the financial services provider has prepared within the context of your business relationship (Art. 72 FinSA). The provider delivers them to you free of charge within 30 days of receiving the request (Art. 73 FinSA). For disputes, the law provides for a mediation procedure before an ombudsman’s office (Art. 74 FinSA). Financial services providers that also serve retail clients must be affiliated with an ombudsman’s office (Art. 77 FinSA). A mediation request does not preclude a civil action (Art. 76 para. 1 FinSA).

Can I switch between mandates?

Yes, you can generally switch between a Discretionary and an Advisory Mandate. Reasons for a switch might include:

• Change in life circumstances: You now have more, or less, time available.

• New financial knowledge: You have engaged closely with financial markets and now wish to take a more active role.

• Shifting preferences: Your attitude to control and delegation has changed.

The process: Speak with your Wealth Manager. Together you will adjust the mandate agreement. It is important to consider the decision carefully rather than acting on impulse.

Everon: Swiss wealth management with in-house portfolio expertise

Everon is a FINMA-regulated Multi-Family Office with its own portfolio management team. We support both mandate types: portfolio structure follows concrete goals and constraints, not a shelf of products.

• In-house portfolio management: Our approach is systematic and rule-based. Multi-factor strategies aim for broad diversification, and because the rules are set in advance, the rule set stays in force even when markets turn volatile.

• Risk profile as the starting point: Before we discuss individual investments, we clarify investment horizon, risk capacity and goals. That becomes the strategy that sets the framework for a discretionary mandate.

• Transparent reporting: Transactions, fees, and performance are visible at any time, in both mandate types.

• Licence and custodian banks: Everon is authorized by FINMA as a wealth manager and works with established Swiss custodian banks.

The two models differ in decision-making authority, time commitment and cost structure. Schedule a conversation to talk the differences through.

Frequently asked questions about mandate types

What is the difference between a discretionary and an advisory mandate?

Under a discretionary mandate the Wealth Manager decides on purchases and sales independently, within a strategy agreed in advance. Under an advisory mandate every single transaction remains the client’s decision, and the Wealth Manager supplies the analysis and the recommendation. The difference lies in who makes the execution decision, not in the quality of the service.

What does a discretionary mandate cost compared with an advisory mandate?

The management fee for a discretionary mandate is typically between 0.5 and 1.5 percent of assets under management per year, sometimes with a performance-related fee on top. An advisory mandate tends to be cheaper because fewer operational tasks are taken on. Transaction costs are often included in the discretionary management fee.

How quickly is a decision executed under an advisory mandate?

More slowly than under a discretionary mandate, because every transaction needs the client’s approval. Under a discretionary mandate execution follows immediately, within the agreed strategy and limits. The difference matters most in volatile phases, where approval loops cost time.

Who is liable under a discretionary mandate and who under an advisory mandate?

Under Art. 394 para. 2 CO, liability follows the law of mandate: under Art. 398 para. 2 CO the provider is liable for faithful and diligent performance, not for any particular investment outcome. Under a discretionary mandate the wealth manager decides and must keep to the agreed strategy and limits. Under an advisory mandate the client decides on every transaction, and the provider is liable for diligent advice. The FinSA additionally governs the financial services provider’s duties of information, assessment and documentation.

Can I switch between the two mandate types?

Yes, switching is generally possible; the mandate agreement is amended. The usual triggers are a change in available time or a different stance on control and delegation. The switch runs through a conversation with the Wealth Manager, not as a unilateral change.

Conclusion: what the decision depends on

Discretionary and advisory mandates both have their place. The decision depends on several factors: available time, existing financial knowledge, the importance of direct control versus response speed, and applicable tax considerations.

Whichever model you choose, what counts is a provider who operates transparently and explains how it reaches its decisions and recommendations.

Last reviewed: October 2026. Sources: FINMA, FinIA, FinSA, CO, FTA.