To go discretionary, or not, that is a question
As some adviser firms look to take greater control of their investment proposition, their fundamental objectives appear to be the same: try to deliver better outcomes, make faster decisions, and provide a more integrated, improved client experience. Yet with this control comes increased responsibility, operational complexity, and regulatory scrutiny – making it critical to approach this decision strategically.
A common misconception about gaining discretionary permissions is that the adviser firm has to do everything in-house – which is not the case. Firms that strike the right balance between control and collaboration – using specialist providers to operate scalable, efficient investment propositions while retaining oversight and decision-making authority – can succeed by focusing on what they do best. Delegation isn’t abdication, it’s a way to maintain control while leveraging the infrastructure needed to deliver a stronger discretionary service.
Why This Is Relevant Now
Discretionary permissions is one avenue pursued by a number of growing businesses. Yet as regulatory oversight of the industry continues to intensify, adviser firms want to ensure that they do this properly. Often, they seek to achieve the same level of risk management, governance, and operational sophistication that institutional investors have long relied on through the likes of Outsourced Chief Investment Officer (OCIO) programmes.
Historically, these capabilities were only accessible to large institutions with significant resources. Today, modular technology solutions and services make it possible for adviser firms to access this same professional approach cost-effectively. This enables advisers to focus on their core strengths – understanding and serving their clients and enhancing the overall proposition.
Why Firms Are Moving This Way
Through my conversations with many adviser firms over the past few years, the reasons behind their exploration of discretionary models follow a few consistent themes:
- Rebalancing efficiency and administration – an ability to react quickly to market conditions without requiring individual client approval for every adjustment, leading to better client outcomes.
- Closer integration – creating a fluid link between investment management and financial planning, which provides a more consistent, personalised client journey.
- Stronger branding – a belief that with this control the adviser is able to present a fully-owned investment proposition under the firm’s name.
- Improved business economics – it allows firms to capture a greater share of the value-chain within client relationships.
However, running a full discretionary proposition in-house can be demanding. It requires investment in people, systems, data, governance, compliance, oversight, reporting, and portfolio management, to name but a few aspects – all areas where the regulatory bar continues to rise. Many firms are therefore adopting a hybrid approach – finding ways to retain control where they add value, while leveraging third-party expertise for other aspects of the investment process.
Build a Team Around Your Talent
Rather than attempting to “build it all”, firms might look to construct their discretionary proposition around what they do best and find the right partner or partners to fill in the complementary expertise. In practice, this means advisers can operate a discretionary portfolio service that is very much their own – their brand, client experience, business and investment philosophy – while leveraging a partner to deliver the operational backbone.
Four Things to Consider
- Identify what makes your firm different (the Four Ps)
Before revisiting or redesigning an investment proposition, firms should be clear on what genuinely differentiates them. A useful way to frame this is through four dimensions:
- People – What expertise, experience, or client insight sets your team apart?
- Philosophy – What core investment beliefs guide your approach, and how consistently are they applied?
- Process – How do your research, asset allocation, and portfolio construction methods differ from others?
- Performance – How do you measure, monitor, and demonstrate outcomes that deliver real client value?
Mapping strengths across these areas helps firms create a clear and credible narrative around where they add value. It also highlights which elements are central to your identity — and which could be enhanced through specialist support without diluting your proposition.
- Revisit and define your investment proposition
All advisers inherently have an investment belief, whether explicit or implicit. Some prefer passive strategies, others believe in active management; some take a blended or risk-managed approach. There is no perfect ‘right or wrong’ answer – but clarity is essential.
With discretionary permissions, firms must decide whether they simply carry forward existing advisory portfolios or evolve toward different types of exposure, structure, or governance. This discovery, or reassessment, should span the entire investment lifecycle – from asset allocation and research, to portfolio construction, monitoring, and rebalancing.
The key is to ensure your proposition is a deliberate expression of your Four Ps, not just a continuation of your advisory portfolios.
3. Assess the operational load and key costs
Discretionary permissions bring additional governance, reporting, and regulatory obligations, including associated costs. There may be elements of your current investment process, regardless of discretionary permissions, for which you haven’t truly quantified the costs. You’ll want to assess what these costs are and determine whether they might be reduced, as well as ensure that your systems, people, and oversight can scale to meet your business growth objectives. Finally, it’s important to document all of this. Clear policies, documented decision-making, and robust systems are essential to good firm governance. This sets you on a path for improving the chances of success.
- Choose partners that complement your strengths
Rather than attempting to “build it all,” firms should focus on the areas where they add the greatest value and partner for the rest. The best partnerships feel like an extension of your team.
Look for providers whose technology, investment solutions, tools, and ambitions align with your own. When partnerships are well aligned, they allow firms to retain control and identity while benefiting from specialist infrastructure – ensuring clients experience a seamless service, even when other specialists are involved behind the scenes.
Finding the Right Approach
It is my belief that the partnership approach will continue to gain momentum as adviser firms evolve their business models to balance control with efficiency. Firms that combine entrepreneurial drive with the right infrastructure will lead the way – allowing these firms to retain the independence and agility that define great advisory businesses, while leaning on trusted partners to deliver resilience, scale, and precision.
FT Adviser Article – Gaining discretionary permissions does not mean firms must go it alone – FTAdviser
