Managing a sophisticated investment portfolio can easily become a full-time job. For investors who are time-poor, there are alternatives. Discretionary portfolios, run by a portfolio manager or financial adviser offer the peace of mind of knowing your investments are being closely monitored and managed, without the need for your constant attention or for you to review and approve every trade.
Establishing a framework to guide decisions
In a discretionary portfolio, you agree to a sophisticated framework that guides the day-to-day investment decisions. This framework would include asset class parameters, industry sector concentration limits and individual stock concentration limits. The portfolio manager would manage your portfolio within these parameters and any previously agreed-upon investment goals.
Setting an appropriate fee structure
Under the discretionary model, your adviser is responsible for deciding when to buy or sell assets. In this arrangement it is important to remove conflict that can be created when transactions generate revenue. It’s equally important that the adviser is free to transact whenever necessary without having to worry about the impact on the fees the client will incur. For these reasons, transaction fees are not typically charged. Instead a fee based purely on assets under management is preferred; where the adviser is neither incentivised to, nor discouraged from transacting.
Simplifying administration
A discretionary portfolio often includes a portfolio administration service which will take care of the collection of dividends, management of corporate actions and handling of investor correspondence. This is designed to further reduce the time you spend managing your account.
Benefits for a broad range of clients
Discretionary portfolios can also be useful for those who are not able to make personal investment decisions for compliance reasons. For example, many senior executives, consultants, accountants and lawyers are required to avoid conflicts of interest that could arise from buying and selling interests in companies that are connected to their professional endeavours. A discretionary portfolio, where the investor has no role in the decision to buy or sell individual assets can be an effective solution in many of these circumstances.
Speak to your Morgan Stanley financial adviser for more information on how a discretionary portfolio can provide sophisticated management while reducing the time and expertise necessary to manage a complex investment strategy on your own.
IMPORTANT INFORMATION
All material on this website has been prepared by one or all of Morgan Stanley Australia Limited (ABN 67 003 734 576, AFSL 233742), Morgan Stanley Australia Securities Limited (ABN 55 078 652 276, AFSL 233741), a participant of the ASX Group and Chi-X Australia, Morgan Stanley Investment Management (Australia) Pty Limited (ABN 22 122 040 037, AFSL 314182) and/or Morgan Stanley Wealth Management Australia Pty Ltd. (ABN 19 009 145 555, AFSL 240813), a participant of the ASX Group (collectively “Morgan Stanley”), for informational purposes only and is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy. Unless otherwise stated, the material was not prepared by the Morgan Stanley Research Department and is not a research report as defined under ASIC guidance.
The material on this website contains factual information only and is not intended to reflect any recommendations or financial advice, nor is it an offer or solicitation in relation to any particular financial product. To the extent this document does contain any general advice, it has been prepared without taking into account your objectives, financial situation or needs, and because of this, you should, before acting on it, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs, and if the advice relates to the acquisition of a particular financial product for which an offer document (such as a prospectus or product disclosure document) is available, you should obtain the offer document relating to the particular product and consider it before making any decision whether to acquire the product.
Before entering into any transaction, you should ensure that you fully understand the terms of the transaction, relevant risk factors, the nature and extent of your risk of loss, as well as the legal, tax, and accounting consequences of the transaction. You should also carefully evaluate whether the transaction is appropriate for you in light of your experience, objectives, financial resources, and other relevant circumstances and whether you have the operational resources in place to monitor the associated risks and obligations over the term of the transaction. We recommend that you obtain financial as well as tax advice based on your own individual circumstances before making an investment decision.
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