Investment management

Under a discretionary mandate, investment decisions are delegated within agreed boundaries. Those boundaries should identify objectives, permitted investments, restrictions and reporting expectations. Delegation does not remove the importance of reviewing whether the mandate still reflects the client's circumstances.

An advisory arrangement leaves the investment decision with the client while providing recommendations within the agreed service. Establish how recommendations are communicated, who can approve an instruction and what happens if a response is delayed. The distinction concerns authority as well as the frequency of contact.

Discuss both the willingness and ability to bear losses. Include planned withdrawals, major future payments, existing concentrations and assets held elsewhere. An operating business, retained shareholding or property exposure can materially affect the risk of a financial portfolio even if it is held outside the mandate.

Record the reporting currency and any spending needs in other currencies. Identify preferences or restrictions, including exclusions and requirements for access to capital. Where objectives conflict, the trade-off should be explicit. A portfolio cannot simultaneously maximise return, eliminate losses and guarantee immediate access under all conditions.

Asset allocation considers how different exposures contribute to the objective and interact with the wider balance sheet. Diversification can reduce concentration, but it cannot eliminate losses. Investment selection should be assessed against the role it serves, its costs, liquidity, risks and available alternatives.

Implementation also matters. Review dealing arrangements, settlement, account authorities and the intended sequence of changes. A staged allocation may reduce operational pressure, but it can leave capital uninvested while markets move. The sequence should follow a documented reason rather than a default assumption that one approach is always preferable.

For a fund or external manager, questions include the strategy, decision process, people, operational arrangements, valuation and redemption terms. Past performance is only one input and does not establish a future result. Consider whether reported returns reflect costs and whether comparisons use an appropriate period and benchmark.

Private investments, structured products and derivatives introduce additional considerations. These may include long holding periods, uncertain valuations, capital calls, issuer exposure, leverage or conditional pay-offs. Access is subject to eligibility and suitability; an investment's complexity is not evidence of its quality.

A review should distinguish market-driven changes from changes in the client's own needs. A portfolio may move away from its intended exposures as prices change, while a new spending commitment can alter the appropriate liquidity reserve even if markets are stable.

Rebalancing involves costs and may have tax consequences. The approach, permitted discretion and review triggers should be discussed in advance. Record the reason for a material change, including the option of leaving the portfolio unchanged where that remains consistent with the mandate.

Agree the scope and frequency of reporting, the treatment of assets held elsewhere and the basis for performance measurement. Valuation dates, cash flows and currency movements should be understandable. Estimates and stale data should be identified rather than concealed in a precise-looking total.

Request the applicable fee information before entering an agreement. Distinguish management or advisory fees, custody charges, transaction costs and expenses within investment products. The combined effect is more informative than one headline rate. Conflicts and relevant commercial arrangements should be explained for the proposed service.

• Who may make and approve investment decisions?
• What limits apply to concentration, liquidity and permitted instruments?
• How are withdrawals and changing circumstances communicated?
• What reporting, reviews and costs are included?
• What happens if the mandate is amended or terminated?

The written mandate and related disclosures govern the relationship. A clear agreement allows a portfolio review to focus on the decisions that matter, with an understood division of responsibilities.