DISCRETIONARY

Summary

Discretionary refers to a type of investment management where clients give their financial advisor or fund manager the authority to make investment decisions without needing approval for each transaction. The manager has 'discretion' - meaning they can buy, sell, and adjust investments based on their professional judgment, within agreed-upon guidelines and risk parameters. This contrasts with non-discretionary accounts where the client must approve every trade.

Usage Context

Understanding discretionary management is crucial when studying investment services, client-advisor relationships, regulatory frameworks, and different types of portfolio management approaches. It's particularly important in topics covering fiduciary responsibility and investment advisory services.

Common Confusions

• Thinking discretionary means the manager can do anything with your money without limits
• Confusing discretionary with advisory services where recommendations are made but not executed
• Believing discretionary management is only for wealthy investors
• Assuming all mutual funds and ETFs are discretionary (they're actually pooled investments)