Discretionary vs. advisory mandates: who decides what?
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Discretionary Mandates
A wealth management mandate is a contractual arrangement by which an investor delegates the management of their assets to a regulated wealth manager. Under a discretionary mandate, the manager takes investment decisions independently within the agreed investment strategy; under an advisory mandate, the investment decision remains with the client. Both are subject to the conduct obligations of FinSA.
The essentials
- Under a discretionary mandate, the wealth manager takes investment decisions within the agreed strategy; under an advisory mandate, the manager proposes and the client decides.
- Wealth managers in Switzerland have been required under FinIA to hold a FINMA authorisation and are subject to ongoing supervision by a supervisory organisation.
- A mandate sets out the investment strategy, investment universe, reference currency, risk profile, and fee structure in writing.
- Transparent fees free of retrocessions are a key quality indicator of an independent mandate.
- No key information document has to be drawn up for financial instruments that retail clients may acquire exclusively within a discretionary mandate (Art. 58 para. 2 FinSA).
Sources: FinIA
Frequently asked questions about Discretionary Mandates
A wealth management mandate is an agreement by which an investor entrusts a regulated wealth manager with the management of their assets. It sets out the investment strategy, risk profile, reference currency, and fees. The manager acts within these parameters and in the interest of the client.
Under a discretionary mandate, the wealth manager takes ongoing investment decisions independently, within the agreed strategy. Under an advisory mandate, the manager puts forward proposals; the final decision rests with the client. The discretionary mandate reduces the day-to-day burden on the client, while the advisory mandate gives the client more direct control.
The standard arrangement is a management fee calculated as a percentage of assets under management, sometimes supplemented by transaction-based or performance-related components. Transparency is paramount: with independent managers, retrocessions ideally do not flow, so that costs are clear and free of hidden incentives.
Assets are generally held in an account and custody account in your name at a custodian bank; the wealth manager holds only a management power of attorney and has no authority to transfer assets to third parties. In addition, wealth managers are subject to supervision by a supervisory organisation and by FINMA.
Under a discretionary mandate, execution follows immediately within the agreed strategy and limits, without consultation before the individual transaction. Under an advisory mandate every transaction needs the client's approval, so execution takes correspondingly longer. The difference matters most in volatile phases.
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This overview is for general information purposes only and does not constitute investment, legal or tax advice. It is a simplified summary of the legal position and tax treatment.
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