It's pretty simple I thought. You activate the approach phase when you want to reduce speed for the purpose of configuring for the approach. The magenta speed target will go to Vapp BUT the actual speed target is the greater of the magenta bug or the manoeuvre speed, GD or S or F, until you're in the approach config.
Personally I leave the approach phase to be automatically activated by the DECEL waypoint unless I want/need to get flap out earlier. Depending on the energy state of the aircraft, I may select speed towards GD until the passing the DECEL waypoint if I think there will be a brief thrust increase between levelling and passing DECEL. I don't activate the approach phase just because of ATC speed control because, why? If the PM looks bored I might ask them to activate the approach phase prior to the DECEL waypoint.
My main consideration when activating the approach phase early is that I'm doing it to avoid a situation where I've selected Config 1 in selected speed then managed the speed and have it rocket back up to 250 knots.