What is Discretionary Investment Management?

Discretionary investment management is a form of investment management service in which buy and sell decisions are made by a trusted portfolio manager for a client's account. The term "discretionary" refers to the fact that investment decisions are made at the portfolio manager's discretion.

This form of investment management can only be offered by individuals who have extensive experience in the investment industry and advanced education.

Discretionary investment management services are mostly tailored to high-net-worth individuals (HNWI) and institutional investors, such as pension funds, since discretionary accounts have higher minimum investment requirements.

The investment manager's strategy may involve purchasing a variety of securities in the market as long as the strategy falls in line with the client's risk profile and financial goals. For example, discretionary investment managers can purchase securities such as stocks, bonds, exchange traded funds (ETFs), and financial derivatives.

Discretionary investment managers do not usually customize, or tailor, client portfolios; rather, investments are made according to the firm?s investment strategies. In other words, clients are grouped according to their defined goals and risk tolerance. Each group will then have the same investment portfolio created from the money deposited by the clients. The actual client account is segregated and the monies invested are weighted accordingly. 

Delegating the investing process to a competent and trusted manager leaves you free to focus on other things that matter to you. 

 Investing with a discretionary investment manager has several benefits for clients: 

• It frees clients from the burden of making day-to-day investment decisions which can arguably be better made by a qualified portfolio manager who is experienced with the vagaries of the market. 

• In most cases, clients have access to better investment opportunities through the portfolio manager. 

• Clients may also receive better prices for executed trades as the portfolio manager can put through a single buy or sell order for multiple clients. 

• Portfolio managers can act on available information quickly and efficiently, selling a position when the markets get overheated. Likewise, the portfolio manager is better positioned to act promptly to seize buying opportunities when markets dip.

• The investment manager's interests align with that of the client since managers typically charge a percentage of the assets under administration as their management fee. If the portfolio grows under the investment manager's stewardship, the manager is compensated by receiving a higher dollar amount in management fees. This form of compensation reduces the investment advisor's temptation to 'churn' the account to generate fees or commissions which is a major flaw of the transaction-based investment model. 

With access to both public and alternative market investment opportunities, we offer a range of investment options tailored to investors risk tolerance. With over 30 years of investment industry experience, George Kurcin leads the Investment team as Chief Portfolio Manager.  

This article is provided for information purposes only. Although the content is believed to be reliable when posted, Stonebrooke Asset Management cannot guarantee this information is current, accurate or complete and does not assume any liability. The information is not intended to provide any insurance, financial, legal, accounting or taxation advice and should not under any circumstances be relied upon without consultation about your specific situation. The information is subject to modification and updating from time to time without notice.