Discretionary Account

A Discretionary Account is an investment account in which an investor gives authority to a financial institution, typically a brokerage firm, to make investment decisions on their behalf. In this type of account, the investor relies on professional portfolio managers of the financial institution to manage their investments.

With a Discretionary Account, the investor benefits from being less active and involved in the investment process and decision-making. The investor entrusts the professional portfolio managers to make investment decisions and manage the portfolio, leveraging their expertise and experience. This allows the investor to focus their time and energy on other activities and not worry about actively monitoring the financial markets.

A Discretionary Account can be customized based on the investor’s risk tolerance, investment objectives, and other specific requirements. The investor can provide guidance to the portfolio managers on investment strategies, asset classes, and risk tolerance. However, the ultimate decisions and transactions are left to the discretion of the portfolio managers.

The advantages of Discretionary Accounts include access to professional portfolio management services, relieving the investor from the burden of actively managing their portfolio, and having more time and energy. Additionally, the portfolio managers typically have more market knowledge and experience, potentially enhancing the investor’s potential for better investment returns.

However, Discretionary Accounts also come with some risks. The investor does not have full control over the investment decisions and strategies of the portfolio managers. Additionally, if the portfolio managers make erroneous decisions or underperform, the investors may be at risk. Therefore, it is important for investors to carefully evaluate the track record, capabilities, and reputation of the financial institution before opening a Discretionary Account.

In conclusion, a Discretionary Account is an investment account that allows investors to delegate their investment decisions to professional portfolio managers. These accounts enable investors to be less active and rely on the expertise of the financial institution. However, investors should carefully assess the risks and capabilities of the financial institution before entering into a Discretionary Account.