What is discretionary portfolio management? Meaning, mandate and how it compares
What "discretionary" means in investing, how a mandate sets who decides what, how it differs from a non-discretionary arrangement, and the questions to ask before you sign one.
People search for this in many forms: discretionary portfolio management, discretionary investment management, discretionary fund management, or simply "discretionary management". They describe the same arrangement. The question underneath each one is who holds the authority to decide what is bought and sold in your portfolio, and within what limits.
What does discretionary portfolio management mean?
"Discretion" here means the authority to decide. In a discretionary arrangement, you give a portfolio manager that authority over your portfolio, in writing, within limits you agree. The manager then buys and sells within those limits without contacting you before each trade.
A discretionary fund manager, or discretionary portfolio manager, is the person or firm who holds that authority. The written agreement that sets it out is called the mandate.
Two things do not change. Your money is still invested, so its value can fall as well as rise. And you have not handed over the mandate itself: you agree it at the start, and you can ask to change it.
How a discretionary mandate works
A mandate divides the decisions into two layers.
You decide the mandate. This is the frame: what the portfolio is for, which asset classes and markets it may hold, and the limits it must stay within. Limits typically cover how much may sit in any one holding or sector, how much is kept in cash, what is excluded, and whether techniques such as hedging or short positions are allowed at all. Short positions carry the risk of losses greater than the amount invested, so it is worth knowing whether your mandate permits them.
The manager decides the trades. Within the frame, the manager chooses what to buy and sell, and when. Trades within the mandate do not wait for your reply.
You are kept informed. Expect statements, access to see your holdings, and a regular conversation about how the portfolio is positioned and why. In the managed account I run, the securities are held in your own name and POEMS account, with online access to your holdings through POEMS and monthly statements. You can always ask how a decision was made.
You can change or end it. Lives change, and a mandate should be revisited when yours does: a new goal, a change in income, a different view of risk. The terms will also say how to add or withdraw money and how the arrangement ends. Read those clauses before you sign, not after.
How this looks with me is set out on the investing page.
Discretionary vs non-discretionary, side by side
In non-discretionary management, the final say on each trade stays with you. A representative may send you proposals with the reasoning attached, but no order is placed until you confirm. At PhillipCapital, this is called a Proposal-Acceptance Arrangement, and on my services page it appears as "Decide together (Advisory)". Many people search for the comparison as "discretionary vs advisory"; it is the same question.
| Discretionary | Non-discretionary (Proposal-Acceptance) | |
|---|---|---|
| Who decides each trade | The manager, within your mandate | You, after receiving a proposal |
| Approval before each trade | Not needed within the mandate | Needed every time |
| Timing | Trades do not wait for your reply | Depends on how quickly you respond |
| Your time | Agreeing and reviewing the mandate | Reading and answering each proposal |
| What you keep | The mandate, and the right to change it | The final say on every trade |
| What to weigh | A mandate may not fit every personal preference | Your response time becomes part of the result |
Neither approach removes investment risk, and neither is right for everyone. I wrote about the trade-offs in more depth in Discretionary or Proposal-Acceptance Arrangement: who makes the final call?, including why response time matters when markets move quickly.
Who each approach tends to suit
Discretionary management tends to suit people who:
- would rather not follow markets day to day, or cannot respond quickly to proposals;
- prefer to delegate the day-to-day decisions and hold one person accountable for them;
- are comfortable agreeing the limits upfront and reviewing them from time to time.
A non-discretionary arrangement tends to suit people who:
- want the final word on every holding;
- have the time to read proposals and respond promptly;
- hold strong views on particular companies, sectors or rules, such as owning dividend-paying shares.
You do not have to choose one or the other
Discretionary and non-discretionary are not an either-or decision. Part of a portfolio can sit under a mandate and part under proposals, and the mix can change over time. For example, someone might place most of their portfolio under a mandate and keep a smaller part where they decide each trade themselves, such as holdings they have strong views on.
Which mix fits depends on your objectives, your finances and how much time you want to spend on it. When a choice turns on several factors at once, the FDM (Facilitating Decision Making) method lets you weigh them openly:
- List what matters to you, such as control over each trade, the time you want to spend, how quickly trades need to happen, cost, and how you are kept informed.
- Give each factor a weight, so the weights add up to 100%.
- Score each option from 0 to 10 on each factor: fully discretionary, fully non-discretionary, and a split between the two.
- Compare the weighted totals.
The result is a choice you can see and check, and revisit when your circumstances change.
Questions to ask before signing a mandate
- What exactly can you buy and sell for me? Ask to see the asset classes, markets and limits in writing, and whether hedging or short positions are permitted.
- How are the fees structured? Mandates commonly charge a management fee set as a yearly percentage of the portfolio's value. It is often taken in monthly portions, at one-twelfth of the yearly rate each month, so ask what value each charge is worked out on. Some mandates also charge a performance fee: a share of the returns above a stated level. If there is one, ask what that level is, how often it is measured, and whether earlier losses must be made back before it is charged again (often called a high-water mark). There may also be transaction, custody or other charges. Ask for the full schedule in writing, and how and when each fee is taken.
- How will I be kept informed? Ask how often you receive statements, how you can see your holdings, how often you will review the mandate together, and whether trades can be explained on request.
- Where are my assets held? Ask whose name the securities are held in, and with which institution.
- How do I change or end the mandate? Ask about notice periods, any lock-in, withdrawal terms and what happens to the holdings if you end it.
- Who is managing my money, and whom do they act for? Look the person up on the MAS Register of Representatives and check the firm and activities shown. It takes a few minutes; here is how to check a representative on the MAS register.
Good answers to these questions, given in writing, tell you more than any brochure.
This article is general information, not guidance for your situation. All investments carry risk, including the possible loss of the amount you invest.
Questions
What is a discretionary fund manager?
A discretionary fund manager is a person or firm authorised, under a written mandate, to make buy and sell decisions in your portfolio for you without asking before each trade. You agree the mandate and its limits at the start.
What is the difference between discretionary and non-discretionary investment management?
The difference is who makes the final decision. In discretionary management, the manager trades within your mandate without waiting for your approval. In non-discretionary management, such as a Proposal-Acceptance Arrangement, you receive proposals and nothing is traded until you confirm.
What does discretionary vs advisory mean?
It is another way of asking the same question. "Advisory" is often used for the non-discretionary route, where proposals come to you and you decide. "Discretionary" means a manager decides within the mandate you agreed.
What does non-discretionary portfolio management mean?
It means you approve each trade yourself. Someone may propose changes with their reasoning, but no order is placed until you say yes.
Can I have both discretionary and non-discretionary arrangements?
Yes. It does not have to be either-or. Part of a portfolio can sit under a discretionary mandate and part under a Proposal-Acceptance Arrangement, where you approve each trade, and the split can change over time.
Is a discretionary portfolio the same as a unit trust?
No. In a managed account, the portfolio is run for you individually within your own mandate. In a unit trust, you hold units in a pooled fund shared with other investors, and the fund's rules apply to everyone in it.
Does discretionary management remove investment risk?
No. It changes who makes each trade decision, not the risks of investing. The value of the portfolio can fall as well as rise, and you can lose some or all of the amount invested.
New article written October 2026 and revised 29 October 2026 with Isaac's edits. Lightly edited for this site.