Discretionary accounts

Discretionary account management services are offered by brokerage firms, investment management companies or banks to help clients manage their investment accounts and conduct trading on a discretionary basis.

If a discretionary account involves securities or futures trading, the discretionary account manager (including the company and relevant staff) is required to obtain the relevant SFC licences or registrations. As discretionary account arrangements can vary, the investor should be clear about the mandate and authority that is assigned to the discretionary account manager, in consideration of the investment objectives, risks, and fees etc.

Once discretionary authority is granted, the discretionary account manager will be able to act on its own initiative without asking the client. Some unscrupulous discretionary account managers may churn the managed account or intentionally select investment products with higher commissions to generate more income for themselves. Therefore, investors should monitor their accounts closely and check each transaction, including the balance and trading details to ensure that the transactions are consistent with their investment mandates and objectives. Additionally, investors should note the disclosures by the discretionary account managers regarding the commissions received from product issuers.

Please see the following sections for more details:  

Different types of discretionary accounts and fee models

Discretionary client agreement

Potential conflicts of interest and commission disclosures

Key points in selecting a discretionary account manager

How should investors protect themselves?

14 Nov 2018