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Discretionary Investment Management Offers a Professional Touch

August 25th, 2023 | 4 min. read

By Jacob Schroeder

Couple meeting investment adviser

Just as you wouldn't perform surgery on yourself, managing your investment portfolio might also benefit from a professional touch. Navigating the complex terrain of investing, with its twists, turns and hidden pitfalls, calls for experience that goes beyond the surface.

At Advance Capital Management, we’re committed to empowering clients to reach their financial aspirations using personalized and strategic investment strategies. That means letting us handle the intricacies of investing, allowing you to focus on living life confidently.

In this article, we delve into discretionary investment management, a strategic partnership that can lead you toward your financial goals with the assurance of a seasoned guide. So, let's explore why, just as with surgery, having a professional by your side might be the best way to ensure a successful outcome.

This article covers:

  • What is discretionary investment management
  • The benefits of discretionary investment management
  • Common misconceptions
  • Is discretionary investment management right for you?
  • When discretionary investment management may not be the right fit

What is discretionary investment management?

At its core, discretionary investment management is a collaborative approach that allows you to hand over the reins of your investment decisions to a team of seasoned professionals. This team, led by your dedicated financial adviser, makes informed decisions on your behalf within the parameters you've set.

Unlike the traditional hands-on approach, where investors closely monitor and execute each transaction, discretionary management brings a refreshing layer of experience and efficiency.

Here's how it works: your financial adviser and investment team construct a personalized investment plan tailored to your goals, risk tolerance and financial circumstances. With this blueprint in hand, they have the authority to execute trades, rebalance your portfolio and make adjustments in your account as market conditions change—all while adhering to the guidelines you've established.

The benefits of discretionary investment management

Embracing discretionary investment management offers a host of advantages that cater to both seasoned investors and those who are new to the financial world:

  • Professional management: Your investment portfolio is overseen by a team of professionals who constantly monitor market trends, identify opportunities and manage risk. This oversight ensures your investments are positioned optimally to weather market fluctuations and capitalize on growth prospects.
  • Time-efficient and proactive: Free from the need to micromanage every investment decision, you have more time to focus on other aspects of your life. Meanwhile, your investment team proactively adjusts your portfolio to seek opportunities and navigate challenges, helping you stay on track toward your goals.
  • Reduced emotional influence: Markets are often influenced by emotional responses to news and events. With discretionary management, decisions are driven by data, research and strategy, minimizing the impact of emotional biases on your investment choices.
  • Transparency and reporting: Despite handing over decision-making authority, you remain in the loop. Regular updates, statements and confirmations keep you informed about your portfolio's performance and any changes made.

What discretionary investment management isn't: Clearing common misconceptions

Discretionary investment management allows you to delegate investment decisions to a team of professionals so you can focus more on your broader financial goals. However, dispelling some common misconceptions about what it entails is essential.

  • No one has access to your funds: One of the most prevalent misconceptions is that granting discretionary authority to your adviser means they have direct access to your funds. This is far from the truth. Your adviser cannot withdraw, transfer or use your funds for any purpose other than investment-related activities within your account.
  • You set the guidelines: Your financial adviser and investment team have the authority to buy and sell investments within the parameters you've predetermined. These guidelines are carefully crafted to align with your risk tolerance, investment goals and financial situation.
  • It’s transparent and secure: Your investments are held securely by a reputable custodian, such as Charles Schwab, which is responsible for the safekeeping of your assets. You'll receive regular statements directly from the custodian, offering a transparent view of your portfolio's performance. Additionally, trade confirmations will be sent to you by the custodian, ensuring a clear record of all activities.
  • It’s empowerment, not control surrender: Discretionary investment management is about empowerment, not relinquishing control. It leverages the knowledge of professionals to make informed decisions on your behalf while safeguarding your financial interests.

Is discretionary investment management right for you?

Knowing whether discretionary investment management aligns with your financial goals, preferences and circumstances is important. This approach is well-suited for individuals and families who value a strategic and hands-off investment experience.

To help you decide, let's explore who discretionary investment management can be an ideal fit for:

  • Busy professionals and entrepreneurs: If your days are packed with meetings, calls and the demands of your career or business, you might find it challenging to dedicate the time required for active investment management. Discretionary management allows you to entrust your investments to a dedicated team while you focus on your professional pursuits.
  • Long-term goal seekers: Discretionary investment management offers a strategic advantage for those with long-term financial objectives like retirement planning, buying a home or funding education. Your adviser and investment team can construct a portfolio designed to align with your specific goals and timelines.
  • Retirees and empty nesters: During retirement, your investment priorities may shift toward wealth preservation and generating consistent income. Discretionary management allows your portfolio to adapt to these evolving needs, offering peace of mind as your assets are managed in line with your changing circumstances.
  • Individuals with complex financial lives: If your financial situation encompasses multiple accounts, assets and intricate financial planning needs, discretionary management can provide a holistic approach. Your adviser coordinates efforts across all aspects of your financial life, ensuring alignment and optimal decision-making.

While discretionary investment management offers compelling advantages, it's important to have open communication with your financial adviser to ensure that your expectations and goals align with the strategies implemented.

When discretionary investment management may not be the right fit

Despite discretionary investment management’s benefits, it’s not a one-size-fits-all solution. There are certain situations where this approach may not align with your preferences or circumstances.

Let's explore when it might not be the best fit:

  • Hands-on DIY investors: If you enjoy actively researching, selecting and executing your investment decisions, you might find the hands-off nature of discretionary management to be limiting. Some investors thrive on the day-to-day involvement in their portfolios, which may not align with the more automated nature of this approach.
  • Short-term traders: Individuals who engage in frequent trading, aiming to capitalize on short-term market movements, are unlikely to find the pre-established guidelines of discretionary management conducive to their strategy.

The bottom line

It's important to note that investment strategies should align with your individual financial goals, risk tolerance and personal preferences.

An open discussion with a financial adviser can help determine whether discretionary investment management complements your financial journey or if an alternative approach might better suit your unique circumstances. Get a free consultation with an Advance Capital adviser for a professional review of your situation and needs.

How should you invest during a market downturn? Learn how to keepmarketdownturn-1your investment goals on track with this guide, How to Survive a Market Downturn.