What discretionary authority can a client grant to an investment adviser?

When a client grants discretionary authority to an investment adviser, it specifically allows the adviser to make investment decisions on the client’s behalf without needing to obtain prior approval for each trade. This includes the authority to choose trades for execution based on the adviser’s assessment of the market and the client’s objectives.

Discretionary authority empowers the adviser to act quickly in the client’s best interest, which can be crucial in volatile market conditions. The adviser has the latitude to make decisions about which securities to buy or sell based on the pre-established guidelines agreed upon with the client.

The other choices involve actions that typically require explicit client approval or may fall outside the standard scope of discretionary authority. For instance, opening additional accounts or changing investment strategies would generally require discussion and consent from the client, as they entail significant changes in the relationship or investment approach that go beyond routine trading decisions. While hiring additional advisers might enhance the management strategy, it is an action that typically necessitates client involvement and agreement. Thus, the primary aspect of discretionary authority relates to the freedom to execute trades as determined by the adviser’s expertise.