Discretionary management mandate, what for ?

Despite the security they offer, life insurance policies in euros have lost their appeal due to the drop in interest rates. In their quest for higher returns, many savers are tempted to invest a proportion of their savings in unit-linked policies.

However, the vast number of vehicles on offer and the risk of capital losses make this a complex choice. Consequently, savers who lack the time or inclination to manage their own policies may be interested in entrusting their management to a third party via a discretionary management mandate.

How does it work?

With the help of their advisers, adherents can delegate the active management of their multi-manager policies to a team of professional managers in the framework of a mandate.

The authorised agent must comply with the policyholders' requirements, i.e. the type of management they desire, including the proportion of share-based vehicles in their portfolios.

The agent must also take account of their profiles, which depend on their investment horizons, their needs and their objectives, their experience of financial markets and their appetite for risk.

The authorised agent is paid commission calculated as a proportion of the total value of the assets under management, or based on performance. The commission rate is higher for dynamic management.

The discretionary management mandate can be implemented when the policy is taken out or during its life, and can be terminated at any time.

This practice offers two major benefits: responsiveness and flexibility.

At the moment, discretionary management mandates are not regulated by any regulatory provisions, although the AMF (French Financial Markets Authority) and professional bodies have started to look into this subject.

Nevertheless, certain precautions must be taken. Comprehensive and detailed information about the management is given to policyholders for each operation, and on a regular basis regarding changes in their asset allocations. 

Each operator has its specificities. At, Predica, the mandate only concerns the riskiest part of the life-insurance policy, i.e. the unit-linked products. The Crédit Agricole Group's asset-management specialists are responsible for selecting the unit-linked vehicles eligible for the mandate and for carrying out arbitrages between these different vehicles.

These experts define a management strategy adapted to the client's investment profile by analysing the risk exposure of the proportion of the policy allocated to the Mandate.

The discretionary management mandate allows for the provision of long-term support for clients and in this way, it is perfectly consistent with the new "Mon Patrimoine" (My Assets) process to be rolled out during 2018.

This offering is an ideal opportunity for advisors to strengthen their relationships with their customers while enhancing their long-term support.