Discretionary Account Agreement

A discretionary account agreement is a legal contract that allows an investment advisor or broker to make investment choices on behalf of a client without obtaining prior authorization. Simply put, it`s an account where the investor gives the advisor the power to make trades without requiring their permission on every transaction. This can be a useful tool for investors who are busy or don`t want to be involved in the day-to-day decision-making of their investments.

There are some key things to keep in mind when considering a discretionary account agreement. First and foremost, the investor must trust the advisor to act in their best interests. Because the advisor has the ability to make decisions without consulting the investor, there is a higher level of risk involved. However, if the advisor is experienced and has a strong track record, the benefits of a discretionary account can outweigh the risks.

It`s also important to note that a discretionary account agreement does not absolve the advisor of their fiduciary duty to act in the best interests of the client. The advisor must still make investment decisions that align with the client`s goals and risk tolerance. Additionally, the advisor must provide regular reports on the account`s performance and notify the client promptly of any material changes.

From an investment perspective, discretionary accounts can offer several benefits. By allowing the advisor to make trades without prior authorization, the account can be more nimble and take advantage of market opportunities that may arise. Additionally, discretionary accounts can help reduce emotion-based trading decisions, which can lead to poor investment results.

If you`re considering a discretionary account agreement, it`s important to do your due diligence and select an advisor with a solid track record. Look for an advisor who is transparent about their investment philosophy and process, as well as their fees and other costs associated with the account.

In conclusion, a discretionary account agreement can be a useful tool for investors who want to delegate investment decisions to a professional. However, it`s important to carefully vet the advisor and ensure that there is a high level of trust and transparency in the relationship. With the right advisor, a discretionary account can help investors achieve their financial goals and objectives.