Discretionary authority is written permission from a client allowing an adviser to make and execute investment decisions in the account without seeking approval for each transaction.
Discretion comes from the advisory agreement and the custodian's authorisation. It is specific and limited to what those documents describe.
Without discretion, a change to a model portfolio requires contacting every affected client and obtaining approval before trading. At any scale that is not workable, and it guarantees that accounts trade at different times and different prices.
Discretion over investments is not authority to move money out of the account. Withdrawal authority is separate, is treated differently by regulators, and can trigger custody obligations with meaningful compliance consequences.
Discretion raises the documentation standard rather than lowering it. Because the client did not approve each decision, the file has to show why each decision was appropriate.
Assets under management generally counts discretionary assets. Non-discretionary relationships usually fall under assets under advisement.
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