What is Non Discretionary Portfolio Management?
A non-discretionary portfolio manager follows the client’s instructions when managing the money. When it comes to making buy or sell choices, the portfolio manager doesn’t make any decisions on his own. For each transaction, the client must be consulted by the portfolio manager. The investor has the last say over decisions like “What to buy/sell” and “When to buy/sell.”
The portfolio manager is in charge of trade execution. Thus, in this instance, the Portfolio Manager offers services related to investment execution but not investment management. In addition to the securities allowed for discretionary portfolio management, the portfolio manager providing non-discretionary or advisory services to clients may invest or advise on the investment of up to 25% of the assets under management of such customers in unlisted stocks.
Advantages of Non-Discretionary Portfolio Management
Investors looking for a customized approach to portfolio management might benefit from non-discretionary portfolio management in several ways.
Improved Oversight and Openness
Clients may actively engage in decision-making and keep an eye on investment activity since they have complete access and control over their investment portfolios.
Co-developed Investment Strategies
Portfolio managers collaborate closely with clients to create personalized investment plans that suit their time horizon, risk tolerance, and financial objectives.
Asset Allocation and Managing Risk
Non-discretionary portfolio management allows for effective risk management and asset allocation techniques that are customized to each client’s needs by actively incorporating them in the investment process.
Applying optimal procedures is necessary for effective non-discretionary portfolio management to provide the best possible results for clients.
Clearly Determining Investment Goals
To help portfolio managers create specialized investment strategies, clients should communicate to them their time horizon, risk tolerance, and investment objectives.
Frequent Reviews and Modifications to the Portfolio
Investment portfolios must be regularly reviewed and continuously monitored in order to adjust to shifting client preferences and market conditions.
Interaction and Collaboration with Customers
A cooperative relationship is fostered, and investment decisions are made in accordance with the objectives and expectations of the client when there is open and honest communication between portfolio managers and clients.
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