Let’s take a look at the average working individual.  Most days are filled with day-to-day work, meetings, personal and professional planning and other opportunistic events to advance one’s career. During these days, a call from your investment professional may get lost in the noise of day-to-day work tasks.

It could even become a nuisance to your busy day.  On the other end of the call, an investment professional could have a great idea that might need immediate attention for the betterment of your financial plan.

‘Opportunity cost’ is the loss of potential gain from other alternatives when one alternative is chosen. This means that while you are busy with your life, the opportunity an investment presents could be lost due to the choice to not address the opportunity presented.

The investment landscape has evolved, and with that evolution comes many benefits to investors.  Discretionary Portfolio Management (DPM) aligns the individual personal investment goals of the client to their long-term financial goals and confirms the trust in their advisor to make the best decision on the client’s behalf.

Through the DPM process, the client is still in control of the agreed upon parameters of their overall portfolio, however, their advisor has the ability to place trades for the benefit of the client without prior instruction.

There are many benefits of this important DPM process in the wealth management industry:

  • Mutual benefit to the client and advisor: The process eliminates “selling” and instead concentrates on wealth management. Both the advisor and client benefit from an increase in client wealth and move away from the traditional commission based approach.
  • Fairness: Every account is treated on an equal playing field. Whether a client has $100,000 or $10,000,000, they will benefit from the best cost and execution of any trade.  Discretionary Portfolio Managers are able to trade in the market as one large trade group instead of a series of individual small trades.  This means that the execution of the trade will be done at one price rather than trying to make many trades in a moving market.
  • Enhanced client-advisor relationship: Portfolio Managers look to build a portfolio to meet the short and long-term goals of their clients. This involves setting out a financial plan and tracking the progress. This relationship is built through trust and communication and may result in long-term upside if approached correctly. Having a higher degree of discretion as Portfolio Managers causes their client relationships to be more interactive at times, thus stronger.

Though Discretionary Portfolio Management is not a strategy for everyone, it does have benefits for many people.  By analogy, when dealing with a health issue, you consult a doctor.  When you have a legal issue, you hire a lawyer.  When dealing with your long-term wealth creation goals, a Discretionary Portfolio Manager may be the right fit.Opinions expressed here by Contributors are their own.

Tom Stachiw

Young entrepreneur born and bred in the Calgary wealth management business. Proven success in personal finance, investment analysis, financial planning, and portfolio management of high net worth clients and small institutions. Currently helping manage over 250 million in assets, growing and building relationships with clients across all stages of life. Former NCAA athlete and Ice Hockey National Champion at University of Wisconsin – Eau Claire. Certified Crossfit Level 1 Trainer (CF-L1) and competitor in the sport of Crossfit.