What is a Discretionary Account?
A discretionary account is a securities account where the client has given specific authorization to a partner, director or qualified portfolio manager to make decisions, select securities and execute trades for him/her without consultation on each transaction. The discretionary nature of Investment Counselling is a distinguishing feature of the industry. The concept of entrusting someone else to manage ones portfolio may be difficult to accept. However, given the education and experience required to qualify as a portfolio manager, the high standards of professionalism that govern the industry and the sometimes complex process of defining and fulfilling investment goals while balancing tax, estate planning and legal issues, it is becoming a more accepted way of handling ones financial affairs.
Discretionary accounts are investment accounts that are structured to allow the broker or another authorized individual to manage the assets of the investor without the need to clear the transactions with the investor beforehand. This approach is usually employed when the investor has a great deal of confidence in a given brokerage house or an individual and feels comfortable enough to turn over all trading decisions to the broker or other person. While the authority to make trading decisions on behalf of an investor is present with any discretionary account, the investor remains the owner of the account and has the ability to revoke privileges at any point in time. Sometimes referred to as a controlled account or managed account, the real advantage of a discretionary account is that it allows the investor to be involved in the investing process as he or she wishes. Individuals who are extremely busy with career or family concerns often find the creation of a discretionary account the
Used in stock speculation and signifies an account, intrusted to the discretion of the broker with whom it is open. Most reputable brokerage houses dislike discretionary accounts and refuse to accept them. 52 THE INVESTOR’S CATECHISM What is a DISCRETIONARY POOL ? A powerful pool is formed sometimes to depress or advance a certain stock or stocks, and its direction is left to the discretion of one or more members who represent the interests of all the members. So-called discretionary pools have at times been formed by unscrupulous speculators who, working on the weak minds of the credulous, have obtained money from various sources, ostensibly to be used in a pool and speculated with at the discretion of the promoter of the pool. Such pools should be avoided by the public and literature received from any so-called firm, out- lining a discretionary pool, should be thrown in the waste basket. What is DISCOUNT ? Interest allowed for advancing money on negotiable securities not yet due; the
