Definition of Discretionary account:
Depending on the specific agreement between investor and broker, the broker may have a varying degree of latitude with a discretionary account. The client may set parameters regarding trading in the account.
Power of attorney arrangement in which a customer gives limited or complete authority to an agent (bank, broker, or investment-portfolio manager) to buy and/or sell securities or commodities on the customers behalf without the customers prior approval or knowledge. Also called controlled account. See also managed account.
A discretionary account is an investment account that allows an authorized broker to buy and sell securities without the client's consent for each trade. The client must sign a discretionary disclosure with the broker as documentation of the client's consent. A discretionary account is sometimes referred to as a managed account; many brokerage houses require client minimums (such as $250,000) to be eligible for this service, and usually pay between 1 percent and 2 percent a year of assets under management (AUM) in fees.
How to use Discretionary account in a sentence?
- A discretionary account is one in which clients hand over control of their trading account to brokers or advisors, who select and execute trades for them.
- Clients can customize such accounts by specifying restrictions or preferences for investing style or themes. In recent times, robo-advisers have also become popular instruments for discretionary accounts.
- Advantages of discretionary accounts include quick execution of trades and expert services. Disadvantages of discretionary accounts include higher fees and the possibility of negative performance.
Meaning of Discretionary account & Discretionary account Definition