Advisory or discretionary investment services?

Barclays’ Wealth Division has closed its discretionary fund management service to those clients who have less than £250,000 of assets.

This is not surprising because most wealth management operations are looking very closely at the cost of delivery of a discretionary management service to “low value” clients.

To be fair describing someone as “low value” because they only have £250,000 or less of investable assets is going to get up a lot of people’s noses.

In my view such a sum is a pretty significant amount of money.

Discretionary management is where the investment manager, operating under a mandate given to him by the client, decides what investment assets to buy and sell and reports back to the client after the event.

Advisory investment management on the other hand requires the client to explicitly accept advice to buy and sell assets before the event takes place.

We lean in favour of advisory because we believe that the vast majority of clients should take an active role in the investment of their portfolios.

Costs between advisory and discretionary investment services are pretty much on a par with one another these days although in our experience there may be a slight cost advantage to the advisory approach.

There a just far too many choices available to do any meaningful performance comparison so often it will come down to confidence in the advisor and confidence in the systems and processes that they adopt.

Some good questions to ask include;

* Are the investment decisions linked closely to my financial planning goals and objectives?

* Do you aim to protect against the worst of any investment downside rather than chasing double digit returns?

* What are the key parts of your firm’s investment philosophy?

* How often and how do you report progress to me?

If you are one of the Barclays Wealth clients who are considering what you do now that the discretionary service has been withdrawn from you, we will be happy to show you ours in more detail.

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