A core part of your wealth management will be investment management. Typically, you will appoint a number of asset managers to run your portfolio. This is because no one asset manager is usually the best performer across one asset class let alone all asset classes. Diversification is key across both asset classes and asset managers. It is likely that you will choose asset managers to manage your portfolio in conjunction with your wealth manager.

Discretionary asset managers and stockbrokers provide different levels of service. These include discretionary services, advisory services, comprehensive financial planning and execution only services. The differences between these services relates to the level of advice you receive. Most asset managers and stockbrokers only manage investments and their service does not extend beyond this. Very few take account of tax planning in constructing and managing portfolios.

Discretionary services give your investment manager complete authority to buy and sell investments for you without obtaining your prior approval. This should follow the drawing up of a mandate that creates a clear framework for your portfolio manager to use when making transactions on your behalf.

The advantage of this service is that the asset manager can act instantly on changes in the market rather than spending time trying to contact you. It is also often cheaper as deals can be done in bulk. Every time a transaction is made, you should receive a contract note and detailed reports should be sent to you regularly. Most discretionary asset managers will use both collective investments and individual shares in your portfolio.

Advisory services should begin with the construction of a brief that includes the establishment of investment objectives. This should provide the asset manager with a guide to the level of advice you need. Instead of managing the portfolio without consulting you, the asset manager should suggest courses of action you may or may not agree with. As well as verbal or written advice, you may receive regular newsletters that provide commentary and information on investment markets.

A second level of advisory service provides you with access to advice but allows you to manage your own portfolio. In this case, your can telephone your asset manager and ask whether he agrees with your assessment of the shares you are planning to buy or sell.

Execution only services are generally the cheapest as they do not require advice or portfolio management. Under this scenario, you inform the manager of the shares you wish to buy and sell. This service is only appropriate for those investors who are confident about the ability to manage a portfolio of shares and want transactions to be completed quickly. You are responsible if the investment decisions go wrong. While a number of telephone and Internet-based brokers offer this service, an increasing number of traditional stockbrokers also provide execution only services.

There are a number of questions you should ask asset managers before appointing them. An important consideration is how a new manager will complement your existing asset managers in terms of investment style, target returns and level of risk. The questions to ask include:

• Does the asset manager have one distinctive investment style? Is a style or investment views imposed on fund managers at the firm? Do managers have the freedom to operate individual investment styles?
• What is the risk profile of the firm’s investment approach? How concentrated are the firm’s portfolios?
• What regulations is the firm subject to?
• What is the performance track record of the asset manager?
• Agree an acceptable performance benchmark. What out-performance target have they set and over what time period?
• What research does the asset manager use? How many managers and analysts work at the asset manager?
• What is the turnover of the asset manager’s typical portfolio? Does the typical asset allocation complement other asset managers in your portfolio?
• Are there client relationship managers? How often do they review client portfolios and whether you still have the same investment objectives and risk profile?
• How often will you meet the relationship managers? How often will you receive portfolio reports?
• How are the fund managers paid? Will they earn performance fees and on what level of out-performance? 
• Does the asset manager have systems to ensure that any investment restrictions you place on the portfolio are observed?
• Does your portfolio get overseen by the asset manager’s senior management to ensure it is being run diligently?
• How do the managers ensure that risk is effectively managed?
• What asset allocation approach do they use and why?