Understand the services of Investment Advice and Portfolio Management in 2026

1. What is Investment Advice?

Under Directive 2014/65/EU on Markets in Financial Instruments (MiFID II), investment advice refers to the provision of personal recommendations by financial professionals to clients. These recommendations may be provided either at the client’s request or on the initiative of the investment firm and must relate to one or more transactions involving financial instruments. 

A recommendation is considered personal when it is addressed to a person in their capacity as an investor, potential investor, or as an agent acting on behalf of an investor or potential investor. It is not considered personal when it is issued exclusively to the public. While communications sent to groups of clients are less likely to constitute investment advice, the fact that a recommendation is made to several clients does not automatically exclude it from being considered as such. 

Compliance with MiFID II requirements is essential for investment firms seeking to provide personalised, transparent, and properly documented investment advice. 

2. What is Portfolio Management?

Portfolio management involves managing a collection of financial assets, such as stocks, bonds, and other investments, held by an individual or institution. The purpose of a portfolio is to diversify risk and potentially enhance returns by investing across different asset classes, which may perform differently under varying market conditions.  

There are two main types of portfolio management: 

• Discretionary Portfolio Management means that buy and sell decisions are made by the portfolio manager at their discretion, without requiring the client’s explicit consent for each transaction. The client therefore places significant trust in the manager’s expertise and decision-making. 
• Non-Discretionary Portfolio Management means that the client retains decision-making authority, while the portfolio manager provides advice and recommendations. The client must approve any proposed action and therefore maintains full control over investment decisions. 

The portfolio manager must ensure that the portfolio remains aligned with the client’s financial goals, investment objectives, investment horizon, and risk tolerance. 

Do not hesitate to contact us at compliance@salvusfunds.com if you require support with your MiFID II regulatory obligations or would like more information about our course on IforPE. 

3. Suitability Assessment 

When providing investment advice or portfolio management services, investment firms must carry out a suitability assessment to ensure that the recommended financial products or services are appropriate for the client’s needs. 

Key Areas of Suitability Assessment include:  

• Client’s Knowledge and Experience – assessing the client’s knowledge and experience in the investment field relevant to the specific product or service. 
• Financial Situation – evaluating the client’s financial circumstances, including their ability to bear losses. 
• Investment Objectives and Risk Tolerance – ensuring that the recommended investment services and financial instruments are consistent with the client’s objectives and risk profile. 

Firms must provide appropriate warnings where a product or service does not match the client’s circumstances and, when providing investment advice, explain how the recommendation meets the client’s preferences and objectives. 

4. Matching Clients with Suitable Products 

A key aspect of both Investment Advice and Portfolio Management is ensuring that clients are matched with suitable financial products. To achieve this, investment firms must establish clear policies and procedures that ensure: 

• A thorough understanding of the client’s financial circumstances, investment objectives and risk tolerance. 
• Ongoing assessment of the client’s existing portfolio and its suitability. 
• A clear understanding of the risks and characteristics of each product considered for the client, including any direct or indirect costs involved. 

Suitability assessment is not limited to recommendations to buy a financial instrument but to also hold or sell an instrument or not.   

5. The role of the Portfolio Manager

The Portfolio Manager is responsible for understanding the client’s financial profile and investment objectives, while monitoring the portfolio on an ongoing basis, including stop-loss levels, profit targets, internal controls and risk management. The portfolio manager must manage client funds on a discretionary basis in line with the client’s profile and mandate. The manager must also coordinate investment selection decisions based on research reports and input from the investment committee. 

Among other responsibilities, a Portfolio Manager must: 

• Comply with the firm’s code of conduct and maintain confidentiality. 
• Act in the best interests of the client. 
• Determine portfolio composition and execute trades and transactions. 
• Assess transaction performance and monitor positions continuously. 
• Prepare client communications and report on portfolio performance. 
• Prevent market manipulation. 

Final Thoughts 

Understanding the services of Investment Advice and Portfolio Management is more important than ever. With evolving regulatory requirements and ongoing developments under MiFID II, financial professionals must continue adapting to maintain high standards of service. Greater emphasis on suitability, transparency and compliance is essential to strengthen client trust and ensure regulatory adherence. 

In collaboration with the Institute for Professional Excellence (IforPE), SALVUS offers a self-study CPD course titled “Understand the Services of Investment Advice and Portfolio Management in 2026”. Designed for professionals working in Cyprus Investment Firms and other entities regulated by the Cyprus Securities and Exchange Commission (CySEC), the course provides an overview of the different types of services, the responsibilities of the relevant professionals, and key areas such as suitability assessment, investment policy and portfolio management agreements. 

SALVUS can support you in meeting the regulatory requirements applicable to Investment Advice and Portfolio Management through its MiFID II Compliance Advisory services. 

Do not hesitate to contact us at compliance@salvusfunds.com if you require support with your MiFID II regulatory obligations or information about our course on IforPE.

#StayAhead

If you’re interested in learning more related to this topic, please visit the following articles below:  

• Understand MiFID II Product Governance & Investors Information in 2026 
• Learn Marketing Communication & MiFID II Investor Protection in 2026 
• Master of Best Execution Requirements in 2026 

The information provided in this article is for general information purposes only. You should always seek professional advice suitable to your needs.