Discretionary mandate

A discretionary mandate is a contract in which you hand day-to-day investment decisions to a private bank or asset manager, who buys and sells within limits you have signed. It is distinct from an advisory mandate, where the bank recommends and you approve each trade, and from execution-only, where the bank simply carries out your instructions.

How a discretionary mandate works

The mandate sets a risk profile, a strategy (often a house model labelled conservative, balanced or growth), the permitted asset classes, any exclusions and a benchmark. Within that box the manager trades without calling you. You receive periodic statements and a performance report against the benchmark the bank selected. Fees are usually a percentage of assets, sometimes with a performance fee, plus the costs inside the funds used. A founder with accounts at several banks ends up with several mandates, each with its own risk scale, benchmark and report format, and no common rulebook unless the family writes one: an investment policy statement.

What is the difference between a discretionary and an advisory mandate?

Under a discretionary mandate the manager decides and trades within the limits you signed; you are informed afterwards. Under an advisory mandate the bank proposes and you decide, so every trade needs your approval. Discretionary saves your time but moves control to the bank; advisory keeps control but demands attention and leaves the accountability with you.

What the bank does not tell you

Delegating decisions does not delegate oversight. The bank chooses the benchmark it is measured against, reports in its own format and may fill the portfolio with in-house funds that pay retrocessions. For families with several million to tens of millions spread across banks, nobody checks whether the mandates together still match the family’s liquidity needs and concentration limits. In a founder with four banks and no single view, two discretionary mandates held the same large-cap names, and equity exposure was higher than either banker believed. Before signing, ask for the benchmark in writing, the share of in-house products, the full fee stack and the terms for ending the mandate.

PWA designs and runs the operating layer around private wealth: one investment policy, one consolidated view across mandates and a review calendar, set out under Investment & Wealth Architecture. PWA does not manage money, hold mandates, take commissions or give regulated investment, tax or legal advice. If you already hold several mandates and want to know whether they add up, start with a written second opinion.

---

This entry is part of PWA’s plain-language glossary of terms used in modern family office architecture.